There seem to be a lot of angry talk about various risk management certifications on the web lately. Most comments are coming from people who are very ill-informed about how certification, any certification, works. As a creator of two national risk management certification programs that have been hugely successful in Russia, here are my two cents. First, here are some sobering facts:

• Almost every country in the world has its own national non-financial risk management certification; there are also a few pan-European and global ones
• All are optional, none are compulsory by law (despite many unethical attempts to limit competition)
• Most certifications are done by national risk management associations, although some countries have healthy competition that offers more than one certification program to local markets
• Regulators and employers are mainly ignorant regarding non-financial risk management certifications, hence one certification program does not have noticeable advantage over the other
• All certifications are built on some globally recognized foundation; ISO31000 seems to be a favorite one and is my favorite, as well
• Certification is just an exam with options including self-study, online prep training or face-to-face prep training (how long the training is is irrelevant, because certifications test prior and existing knowledge; training is more like a refresher)
• Most existing certification programs are useless because they still focus on conducting risk assessments and treating risk management as a stand-alone independent process — there are, however, some good ones
• There is limited to no quality control or oversight in place

See also: The Current State of Risk Management   In this video, I give my advice on how to choose the best non-financial risk management certification: Below is an example of the certification program developed by RISK-ACADEMY — a Russian leader in risk management training, Global Institute for Risk Management Standards (G31000) and the best risk managers from Russia and the CIS. The program is aligned with the international risk management standard ISO31000:2009 principles and shows numerous examples of how COSO:ERM 2004 is flawed in almost all regards. It consists of four modules: Module I: Risk Management Foundations

• Definition of risk
• History of risk management
• International and national standards in risk management
• Introduction to finances, project management and process management
• Introduction to statistics
• Insurance basics

Module II: Risk Management in Decision Making

• Tools and techniques to identify risks associated with decision making or the achievement of goals/KPIs
• Tools and techniques to analyze and quantify effects of uncertainty on decisions or on achievement of KPIs (decision trees, sensitivity analysis, scoring models, Monte Carlo simulations, scenario analysis, bow-ties)
• Risk mitigation within the confines of decision making and achievement of KPIs
• Monitoring, reporting and communicating decisions made or the achievement of KPIs with risks in mind

Module III: Psychology and Culture of Risk Management

• Cognitive biases inherent to decision making and risk management
• Integrating risk management principles into the overall corporate culture
• Principles of professional ethics

Module IV: Integrating Risk Management in a Business

• Aligning risk management efforts with the overall risk appetite
• A road map for integration of risk management:
  • Developing new and updating existing policies and procedures
  • Integration into decision making, planning, budgeting, purchasing, auditing
  • Risk management roles and responsibilities, risk management KPIs
  • Integrating risk information into management reporting
• Resources required for the implementation of risk management
• Monitoring and evaluation of the effectiveness of risk management (maturity models, including our own advanced risk management maturity model)
• Risk management continuous improvement
• Risk management software

See also: What Gets Missed in Risk Management More information about RISK-ACADEMY, our training courses and services at https://www.risk-academy.ru/en/ Download the free risk management book here. Watch more free risk management videos on http://www.risk-academy.ru/en/risk-management-video/ or subscribe to RISK-ACADEMY youtube channel.

Insurers often overlook the importance of cloud computing in their quest for digital transformation. They fail to recognize that the cloud is an essential component of a successful digital strategy. Many insurers are positioning themselves to take advantage of the digital revolution that is sweeping the industry. Some companies, however, are neglecting an essential element of a successful digital strategy. They’re ignoring the cloud. There’s a common misconception among insurers that they can achieve digital transformation without moving to the cloud. It’s a fallacy. Cloud computing, as I pointed out in an earlier post, is a vital vehicle for digital innovation. Cloud platforms and services are supporting a host of digital innovations that promise to radically change the insurance industry. Digital channels, self-driving cars, blockchain, wearables and advanced analytics systems, to name a few, all depend on cloud technology. Without the cloud’s flexibility, reliability, security, capacity and scalability, those things just aren't possible. Many new entrants to the insurance industry are harnessing the power of the cloud very successfully. They’re taking advantage of the flexibility and scalability of on-demand cloud services to target and disrupt key sectors in the insurance industry value chain that offer significant value. As many as 82% of executives at established insurers acknowledge that these newcomers are disrupting their markets. To compete against these new rivals, traditional insurance firms need to embrace the cloud. Around 83% of insurers agree that the cloud will foster innovation in their business that was not previously possible. However, only 49% are currently investing in comprehensive digital technology programs as part of their overall business strategy. Cloud computing is an important component of such programs. It’s a vital technology that drives digital innovation and increases competitiveness. Furthermore, it can also curb costs significantly. See also: It’s Time to Accelerate Digital Change   To capitalize on the benefits of the cloud, insurers should consider these three important steps: Prioritize and optimize migration to the cloud: Leadership teams need to assess a wide range of factors such as refresh cycles; the cloud-readiness of key applications; service demand fluctuation and change frequency; critical business functions; and shifting data requirements. Track value realization: Simply creating a business case for cloud migration is not enough. It must be constantly validated. Key metrics should include the ratio of cloud to legacy applications, claims response times and the number of resource hours saved. By closely tracking such metrics, companies can quickly correct deviations from their migration path and accurately plot further initiatives.  Quantify the return on agility: Measure cost savings but also gauge the additional revenue generated from the faster rollout of new cloud-enabled capabilities. Income from new digital services, for example, is an important component of the value cloud computing can offer insurers. For further information about how insurers can benefit from cloud platforms and services, have a look at this link. I think you’ll find it useful.

Finished innovation outcomes do not neatly fit into the calendar year; they need to be seen and evaluated differently, based on their complexity, newness to the world and value potential. The three frames of thought, referred to as the three-horizon framework, break innovation down into three horizons: Horizon 1: Goals or outcomes that contribute to the immediate plan and can be budgeted in good, granular ways with solid detail. Horizon 2: Goal objectives that move concepts or ideas forward but have longer-term horizons before they yield an outcome return — where some actual spends get accounted for in multiple years where you can provide reasonable forecasts or milestones toward validation. Horizon 3: Those ideas that offer the potential for a new state of innovation that explore many unknowns but are working toward a new future state. These are where pilot money is allocated and projected out over learning activities and agreed to milestones, where understanding and recognizing investigation may involve years of exploration, connecting multiple dots and growing recognition of different degrees of failure. See also: Innovation Maturing Into Major Impacts   Planning and acknowledgment of each horizon-need have to be recognized as distinct, accounted for in their differences, then laid out in some form on innovation roadmap, to cover all three for balanced progression. Managing different horizons of innovation is critical to building a more robust portfolio of options.

here has been speculation for years now about how soon driverless cars would hit the road, and we finally have our answer: The time is now. 

With Google's Waymo arm announcing deployment in Phoenix, we have our first real fleet of cars on the road without someone sitting in the driver's seat. Deployment will be phased in—Waymo, for instance, still has an employee sitting in the back of the autonomous minivans, able to hit a button to have the vehicle pull over and stop if anything goes wrong. But, now that we've crossed the starting line, the pace of the race should only pick up from here.

Our own Guy Fraker, ITL's chief innovation officer, says Florida is the state to watch. Guy, who lives in the Florida Keys (and escaped catastrophic harm to his house despite being almost in the center of the eye of Hurricane Irma), has been working with Florida regulators on autonomous cars for some time now. He is, in fact, speaking this week at the Florida Autonomous Vehicle Summit in Miami. 

Some 34 companies are already operating autonomous vehicles in Florida, almost all in stealth mode. A main reason is that Florida regulations mean that AVs don't require any more insurance than an Uber or other vehicle operated by a TNC (transportation network company). Guy credits Jeff Brandes, a state senator, with leading the way as Florida peels back layers of regulation to spur the use of AVs. As a result, Florida is very likely to be a pioneer, with all sorts of lessons for the rest of us -- including about liability and insurance.

I expect that Phoenix and Florida provide a pretty good road map, if you will, for how AVs will be deployed through roughly 2025.

The early deployments will be in limited geographic areas—"geofenced," to use the term of art. The reason is that to get to full autonomy, the technology at this point seems to require extraordinarily detailed maps. Those are possible within limited areas, and cities are great candidates because the roads are generally better-maintained and -marked than those in suburban or rural areas.

Southern cities will draw companies that use electric vehicles (and the AV sensors require huge amounts of power) because batteries don't like really cold weather. More expensive cities will also draw attention because they will provide a higher price umbrella that will let AV companies charge more. Some cities may be prized because their complexity means that anyone operating there must have top technology. Uber has been operating in Pittsburgh (with "safety drivers" up front) for some time, partly because of the difficult topography, uneven quality of the roads and challenging weather. GM's Cruise has been running increasingly extensive tests of AVs at its home base of San Francisco, with its hyper-challenging hills and narrow streets. Cruise says it will run a test fleet in what, for AVs, is the Wild, Wild East (New York City) starting next year.

Many cities and states will likely imitate Florida and try to be pioneers once they become comfortable with that the technology really is safer. So, change could come fast when we reach the tipping point.

For now, the geofencing and expense will likely limit AVs mostly to shared uses as "robotaxis," competing with Uber, Lyft, et al. But many expenses will follow a Moore's Law curve of the sort that has been cutting the costs of electronics by 50% every year and a half to two years since the 1960s. For instance, GM announced recently that it had acquired a technology company that might be able to cut by "almost 100%" the cost of Lidar (the laser-based version of radar generated by those devices you see spinning on the tops of AVs). I initially thought the figure was a typo or some silly hyperbole. But the company, Strobe, really does say it can cut 99% out of the roughly $70,000 cost for today's Lidar by replacing the spinning device with just two stationary chips.

Expenses should drop so much that, as technological limitations go away, personally owned AVs should become widely available by the middle of the 2020s. That's the point at which the huge change should start to hit insurance, as accidents plummet and liability shifts to the makers of the cars and away from the drivers.

There's still some question about how quickly the change will hit once we get to 2025 or so. It ordinarily takes more than 15 years for the inventory of cars on the road to turn over; regulators will, I assume, do whatever they can to accelerate the use of AVs once the safety benefits become clear—how could they not?—but the pace of change is still unclear. 

What is clear is that AVs are now reality. When Chunka Mui and I wrote our book "Driverless Cars: Trillions Are Up for Grabs" more than 4 1/2 years ago, we laid out an aggressive timeline for how quickly AVs would develop—and events may be overtaking us.

Fasten your seatbelts. And keep an eye on Florida. 

Cheers,

Paul Carroll,
Editor in Chief

The other installments in this series can be found here. So far, I’ve talked about the specifics of claims, underwriting and product development, but I haven't really talked about the back office administration functions. If you’ve been with me so far, you won’t be surprised to hear that I think AI, robotics and other automated systems will transform those functions, as well, and empty them of people. See also: Advanced Telematics and AI   The Insurer of the Future will reorganize its back office using automation – but it will do so smartly. By smartly, I mean that it will figure out how and where to automate to gain the greatest commercial benefit. Some processes will need to be transformed by using stronger, more automated, core systems. Some processes, or sub-processes, will gain most from the use of AI/cognitive capabilities: chatbots, vocalbots, machine learning, recommendation engines etc. And any gaps might best be filled using robotic process automation (RPA) or even non-technology tools such as Lean. There will be instances where it makes sense to use more than one of these techniques – perhaps capturing short-term efficiency gains through interim RPA of a sub-process, while a more comprehensive longer-term solution is being developed. See also: 3 Keys to Success for Automation   The source of success for the Insurer of the Future, however, will be figuring out (smartly) exactly what to apply where, and in what order, to create the highest return on investment.

Key Points 

• Recent shifts in insurance regulation are driven by consumer demand.
• Traps for the unwary mean that insurtech startups should engage with regulators early and often.
• Brokers need to know how to navigate the complex framework of anti-rebate and anti-inducement laws.

It is no secret: Investors are pouring money into insurtech startups with the goal of transforming the insurance industry. This increased investment is fueling not only growth in the industry, but also growth in the number of conferences, expos and seminars that allow companies to promote their products, build connections and stay abreast of the latest trends. Last month, more than 3,500 startups, insurers, investors, and service providers converged on Las Vegas for the largest and most global of such conferences: InsureTech Connect. Attendees at this year’s event were treated to a host of presentations, from insightful fireside chats with entrepreneurs, such as Metromile’s Dan Preston and Ring’s Jamie Siminoff, to thought-provoking panels on satellite imagery, telematics, wearables and innovative strategies for insurance companies of the future. See also: InsureTech Connect 2017: What’s New   But, as excitement and buzz steadily mount, at least one panel reminded attendees that insurance—while highly ripe for innovation—is also a highly regulated industry. The panel (“Balancing Innovation and Regulation”) featured Michael Consedine (CEO of the National Association of Insurance Commissioners), Ted Nickel (Insurance Commissioner of Wisconsin) and Chris Cheatham (CEO of Risk Genius). Here are our key takeaways of that panel discussion. Recent policy shifts are driven by consumer demand. Over the past 200 years, the insurance industry has gone through periodic changes. But, as Consedine explained, this is the first time that significant changes are being driven by consumer demand. Specifically, consumers are demanding simpler and more intuitive policies; a streamlined and digital application process; faster claims payments; mobile access; and new products, such as peer-to-peer or pay-as-you-go. Insurance regulators nationwide realize that innovation will lead to consumers being better served, and, as a result, they are taking an active role in being a part of the conversation and enabling innovation. Traps for the unwary mean that insurtech startups should engage with regulators early and often. Once a company begins to analyze risk or price products, it runs the risk of being considered an insurance company and, more importantly, being subject to a host of often complex regulations that vary from state to state. For instance, while the amount and quality of available data are exploding—opening up the possibility of using new or unconventional data to price risk—state laws prohibit not only unfair discrimination generally, but also specific factors from being considered when pricing risk. In other words, as Mr. Nickel explained, a data set may show that there are more pool deaths in years when a Nicholas Cage movie is released, but whether that correlation is actuarially sound, let alone a fair basis on which to make pricing or rate decisions, is something that companies should discuss with regulators before launching. The same is true with respect to other issues, such as privacy or cybersecurity regulations—companies should understand the regulatory regime in which they operate and ensure that they are in compliance. To that end, Mr. Nickel encouraged companies to engage regulators from the outset to explain how a new algorithm or business model works to ensure that they are not running afoul of state regulations. If you are a broker, be aware of anti-rebate and anti-inducement laws. Nearly every state (with the notable exception of California) has some form of anti-rebate or anti-inducement laws on the books. Generally, these laws prevent a broker from providing something of value to a customer to “induce” an insurance purchase. While promotional items, such as golf balls and pens, are often exempt from such laws, a company must be especially careful when it begins to offer—at no charge—more valuable goods or services to its customers. According to Nickel, these laws might be particularly problematic for new entrants into the industry. For example, if a broker provides a wearable device to its customers, might such a gift implicate anti-rebate laws? What about specialized software provided at no charge? New companies in the broker space should ask themselves these sorts of questions sooner rather than later, seeking out counsel when necessary to avoid regulatory issues down the road.

Hurricanes Harvey and Irma have wreaked havoc on the lives of thousands of Americans, leaving many looking for ways to assist those in need and achieve favorable tax treatment. The IRS has maintained historical guidance, and it made recent announcements that provide guidance for those individuals and employers looking to assist victims. Employers Can Offer Tax-Free Assistance to Staff  An employer may provide assistance to employees affected by a presidentially declared disaster in a manner that is exempt from federal income and employment taxes. Providing assistance in cash or services is relatively straightforward and requires no substantiation from the employees, while still allowing the employer to deduct the payments. Because there are virtually no administration requirements, an employer can react very quickly to help alleviate its employees’ immediate needs. The exclusion is provided by Internal Revenue Code (IRC) Section 139(a) and specifically exempts from gross income “Qualified Disaster Relief Payments” that are not compensated by insurance or otherwise. “Qualified Disaster Relief Payments” can be paid to, or for the benefit of, an individual to reimburse or pay reasonable and necessary expenses incurred:

• As a result of a qualified disaster for family, living or funeral expenses;
• For the repair or rehabilitation of a personal residence; or
• For repair or replacement of the contents of a personal residence — to the extent that the need for such repair, rehabilitation or replacement is attributable to a qualified disaster.

Revenue Ruling 2003-12 shows how this provision is particularly helpful after a hurricane, stating, “Payments that employees receive under an employer's program to pay or reimburse unreimbursed reasonable and necessary medical, temporary housing or transportation expenses they incur as a result of a flood are excluded from gross income.” In addition, the rule explains that the amounts excluded from gross income under Section 139 are not subject to typical reporting requirements. See also: Harvey: First Big Test for Insurtech   Increased Access to Retirement Plan Funds  The IRS recently announced relaxed procedural and administrative rules that normally apply to retirement plan loans and hardship distributions, specifically for victims of Hurricane Harvey. Participants in 401(k) plans, 403(b) tax-sheltered annuities and 457(b) deferred-compensation plans sponsored by state and local governments may be eligible to take advantage of streamlined loan procedures and loosened hardship distribution rules designed to provide quicker access to their money. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply. While IRA participants are not allowed to borrow from the IRA, they may be eligible to make IRA withdrawals under liberalized procedures. Not only does this broad-based relief apply to victims of hurricanes, it also applies to a person who lives outside the disaster area, takes out a retirement plan loan or hardship distribution and uses it to assist an immediate family member or other dependent who lived or worked in the disaster area. Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. In addition, the plan can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement. To qualify for this relief, hardship withdrawals must be made by January 31, 2018. Before accessing retirement funds, it is important to remember that the relaxed procedures have not changed the tax treatment of loans and distributions. Retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less and hardship distributions are generally taxable and subject to a 10-percent early-withdrawal tax unless one of several exceptions is satisfied. Employee Donations of Leave The IRS also recently issued Notice 2017-48, which indicates they will not assert that cash payments an employer makes to a charitable organization in exchange for vacation, sick or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are: (1) made to the charity for the relief of victims of Hurricane Harvey and Tropical Storm Harvey; and (2) paid to the charity before January 1, 2019. The employee does not take the money into income and therefore does not get a charitable deduction. IRC 501(c)(3) status for disaster relief organizations When considering natural disasters like Harvey or Irma, a company may want to donate to an existing charity, or they may want to form a new charity. If an employer forms a new charity, it should be sure the assistance is geared towards a class of persons broad enough to constitute a “charitable class.” In other words, assistance cannot simply be for a single family or an individual. Even if the group is smaller and limited to a particular group of employees or franchisees, the group could still qualify as a charitable class if the group is indefinite and open ended, such as one that includes victims of a current or future disaster. If a new organization applies to the IRS for 501(c)(3) status, it could be eligible for an expedited review of the application. Existing organizations qualified under section 501(c)(3) could get involved in disaster relief activities that accomplish charitable purposes — even though those activities were not described in its exemption application, without first obtaining permission from the IRS. However, it should report new activities on its annual return. Public charity or private foundation? If the organization qualifies as a 501(c)(3) organization, a determination must be made as to whether the organization is a public charity or a private foundation. Employer-sponsored private foundations can make payments to employees for certain “qualified disasters” that the Secretary of the Treasury has specified. On the other hand, public charities can make payments under broader circumstances, like other disasters or employee emergency hardships. Classification as a public charity will depend on whether there is broad-based public support for the organization, as opposed to a few individuals or a company making the major contributions. In some cases, an organization can be classified as a public charity if it supports another public charity, such as a community foundation. When companies form new organizations to help employees who encounter disasters, it may be possible to show broad public support if other employees make donations. Even though these employees are associated with the company, they still may be considered the general public when it comes to their individual donations, allowing the organization to qualify as a public charity. See also: Hurricane Harvey: A Moment of Truth   Employers cannot excessively control a public charity In addition to the charitable class requirement, an employer cannot excessively control a public charity, nor can the organization impermissibly serve the related employer’s private interests. Recipients should be chosen based on an objective determination of need or distress and should be selected by a group independent of the employer so that any benefit to the employer is merely incidental. If these requirements are met, the public charity’s payments — even if those payments are to employees and their family members — are considered payments for charitable purposes and, thus, are not considered taxable income. For more information This is just a short summary of what companies and organizations need to keep in mind the next time disaster strikes and they wish to extend a helping hand. Companies should review IRS Publication 3833 for more information. Additional resources concerning other tax relief, specifically related to Hurricane Harvey and Hurricane Irma, can be found on the IRS disaster relief page. For information on government-wide relief efforts, visit www.USA.gov/hurricaneharvey or www.USA.gov/hurricane-irma.

This is the third part in the series. You can find Parts One and Two published here and here. Claims is the most emotional segment of the insurance value chain. Because it is the primary point of brand promise, and because it is so emotionally charged, it is also the point at which insurers can affect customer experience, loyalty and long-term reputations. I know this firsthand because my husband and I had a major homeowners claim because of a significant hailstorm this year (deemed a catastrophe as a result of the extent of damage in the region). It was our first homeowners claim ever! Applying the right customer experience and technology solutions at this volatile stage has the ability to take a traumatic, frustrating experience and turn it into a positive, loyalty-building one. Exceeding expectations is vitally important. What may be most important, however, is shepherding people through the process from first notice of loss through complete restoration in a clear manner. In our past two articles in this series, we discussed the importance of insurance preparations for catastrophic claims. We looked closely at how catastrophes, in particular, highlight the strengths and weaknesses of the claims value chain. In this post, we’re going to look at the claims process from the standpoint of relationships. How can we build more relevant touchpoints into the claims process, how might we rethink the process and how can we build value into the process? The digital shepherd A catastrophic event does more than damage property. It interrupts everyday lives and mentally taxes people with circumstances that are out of their control. In many cases, policyholders need direction — and even some hand holding. In pre-claim circumstances, they need direction on how to prepare for an upcoming event. During catastrophic events, such as storms and fires, they need direction on what to do in the midst of damage and relocation. After events, they need a helping hand to guide them through the hurdles of making a claim and restoring or rebuilding their property… and their lives. This sounds natural, but it isn’t as common as insurers may think. Insurers must develop an end-to-end approach to personalized customer engagement and communication that takes into consideration that people likely need more clarity and guidance during the claims process. See also: Rethinking the Claims Value Chain   Yet in the drive for efficiency, insurers have reduced their dependence upon human communications by automating many aspects of their processes. If you were ever placed into “automated voice purgatory” you know what I mean. While this may help with general and mass communication, it can be impersonal and a source of customer annoyance. The ideal claims process will act as much like a human as possible, involving human contact when necessary (even if through cognitive artificial intelligence), and it will be as personalized as possible so customers feel that communications have been tailored to their individual circumstances and needs. Customers expect and need a digital shepherding process that helps them to relax and lean on the support of their “trusted insurer.” A holistic approach to rethinking relationships Insurers use risk models and data models. But how often do they use relationship models? Increasingly, insurers are looking closely at customer journeys. What is the experience that we want our customers to have from the application process through the claims process? With claims, experiences can vary widely because of the diverse relationships involved: mortgage companies, roofing companies, contractors, restoration services and more… an ecosystem of partners and services that influence the ultimate customer perception. The insured who loses a home in a hurricane and didn’t have flood insurance is going to have a remarkably different claims experience than the person who was rear-ended during a state-wide snow storm or one whose home exterior was pulverized by large hail. One claims experience model won’t cover all of these journeys, nor all the partners or services involved. But they should, because any misstep is likely a reflection, good or bad, on the customer journey and experience. Most insurers today have established partnerships with automotive repair shops, ensuring the best prices and quality. Yet most do not have similar relationships for home repairs or restoration. Even more important are relationships with the banks or mortgage companies that have completely different processes and customer engagement approaches that can significantly influence the overall experience. I know from experience. Our insurer was fantastic! First, our agent gave us a list of recommended “credible roofing companies,” making the selection process easy. The roofing company was awesome, as well, and knew how to work with the insurer to ease the process! The insurer immediately responded to our claim (submitted by our agent online) via phone and email, immediately scheduled the adjuster, provided a digital portal to provide constant status of our claim and continuously followed up on any changes or status. We did everything digitally or with a live person, with a copy of all paperwork mailed along with the checks. Contrast that to the mortgage company (who bought our mortgage) that was involved because the size of the claim. I get why the company was involved to avoid fraud. But it was not customer-focused. First, I ended up in “automated voice purgatory.” Once I got out, the service rep said they would send me the paperwork and instructions via email (the only digital interaction in the whole process) that needed to be completed so that the money from the insurer could be disbursed for payment. The completed paperwork was, literally, nearly two inches thick, had to be completed manually and, as we found out later, did not specify things accurately. Three times we had to resubmit new paperwork — but only after we got a “generic standard letter” that was sent via regular mail to get us to call them. Once I called them, they said “Oh, we sent that to get you to call and do this.” Never once did we get an email or personal phone call (which we requested in every submission for confirmation). Suffice it to say the experience was horrible! Why is this important? Because unlike me (who knows and understands insurance), most people do not look at the difference between the insurer, mortgage companies and service providers — to most, the good, bad and ugly is all part of the experience. As such, insurers’ brand reputations, net promoter scores and, ultimately, whether customers stay customers are influenced by these relationships. In today’s digital world, an ecosystem of partners and influential relationships are part of the experience, necessitating a new relationship paradigm and review. Just consider companies like Apple, Amazon and others that have large ecosystems of partners and relationships — they are no longer separate from the process or experience. The customer experience is integrated and seamless. These factors are so important to the future (as we mentioned in our recent report, Cloud Business Platform: The Path to Digital Insurance 2.0) that corporate valuations will soon be partially based upon platform ecosystems and digital assets. That is what insurance needs in today’s digital age. Avoiding fraud without building a culture of claims curmudgeons As I noted above, fraud is a concern for insurers. It is a small slice of the claims value chain where insurers increasingly are focused on fraud mitigation, an important slice that is critical to profitability. Insurers would like to avoid fraud and remain both service-friendly and fiscally-sound. Most insurers keep notes. They retain recorded phone calls. They gather data. They respond when needed. But most don’t have the depth and breadth of sophisticated cognitive capability within their human resources needed to keep close ties to every individual or entity in the process. Cognitive computing can help insurers do better fraud analysis, even assessing upfront whether there is a propensity of fraud to alter the process and avoid less consumer confrontation. Within the claims call center, for example, artificial intelligence can be applied to voice analysis. Unstructured texts, recorded calls and documents throughout the claims cycle can be analyzed to pick up patterns that might indicate fraud. Fraud investigators are assisted by cognitive capabilities operating on new data sources. Artificial intelligence will be uncovering unexpected patterns and relationships between key parties. It will be able to take in a larger set of data sources to improve its potential to relate data patterns. See also: 20 Likely Changes in Ethics on Claims   Majesco, in its partnership with IBM, is building cognitive strategies and solutions that will augment existing capabilities throughout the claims value chain, including fraud detection. Artificial intelligence and cognitive computing will enable insurers to be much smarter about how they interact with customers from the beginning and throughout the process — providing a personalized customer experience that adapts to the situation, the potential of fraud and much more. Claims will be a true “learning” environment for AI systems. AI and cognitive will help insurers use claims to rethink the claims process. Adding the value to the value chain Claims range from simple to complex. Catastrophic claims are often highly complex. My hail storm damage is an excellent example. While the insurer experience in contacting a reputable roofing company, processing and assessing the claim and cutting the check was great, the insurer's involvement ended there. But the complexity for me (the insured) had just begun. Some of the hardest work of the claims process is still in the customer’s hands, and they may not be having a wonderful experience. The digital claims experience needs to trend toward increased insurer control of the whole restoration process by rethinking the value chain and developing an ecosystem of partners that redefine the experience. What if pre-approved contractors are contacted just after FNOL, the process adjusts based on propensity of fraud, lenders are digitally integrated into a paperless process and customers receive insurer service through the final inspection? Insurers now have the ability to build and use cloud-based/digitally-operational/partner-enhanced claims ecosystems. The value in filling these service voids is the retention of valuable customers, the ability to control both costs and satisfaction and the protection of the insurer's brand. The customer experience should be rooted in a new insurance philosophy that is based more in customer experience, claims prevention and customer retention than in claims ratios and payouts. At some level, all customer relationships will involve digital touchpoints from pre-claim through post-claim. And digital touchpoints will be one of the ways in which insurers will begin bringing real value to the value chain. Are you ready to build value into the claims value chain? Are you ready to rethink the process and integrate partners and service providers into a holistic process? Is your organization prepared to give award-winning service during catastrophic claims? As we’ve seen throughout this series, the insurers that are preparing for next-generation claims service will uncover enhanced value and improved loyalty — but only if they think outside their traditional thinking and business processes.

"CyberWrite is here in order to help solve two problems: the first is customer engagement. We offer a one-page report that anybody can understand about the probability and economic impact about the cyber risks for that company. This data can go to the CEO or head of IT for that company and help them make a decision regarding which cyber policy to buy. On the other hand, underwriters and the risk officers at insurance companies can use our solution and data in order to decide if the risk is suitable for their risk appetite and offer the customer the right policy," says Nir Perry, CEO of CyberWrite https://youtu.be/A5mBfij-dkI View more Insurtech Innovator videos Learn more about Innovator's Edge

"We provide a solution for distracted driving and our solution has both a hardware part and a software part: a hardware gadget sits behind the steering wheel and it identifies who is driving the car and the software app is always running in the background and the user phone identifies what apps user is using while he's driving, how long and how often he is using," says Krishna Ashili, Chief Technology Officer of Smart Drivinc https://youtu.be/KL96pTuojuM View more Insurtech Innovator videos Learn more about Innovator's Edge