"HazardHub combined risk data information for every property in the U.S. with cutting edge technology so we can deliver risks for any property, across the country, with an API for lightning speed, giving unprecedented levels of insight about properties in the U.S.," says Bob Frady, CEO of HazardHub https://youtu.be/K-8RCgWshQ8 View more Insurtech Innovator videos Learn more about Innovator's Edge

"Infinilytics a big data company where we specialize in advanced analytics using artificial intelligence and machine learning for claims. What we do is provide a 360-degree view of what's going on in the claim so the claims examiner can make the right decision," says John Standish, Co-founder & Chief Analytics Officer of Infinilytics https://youtu.be/4x4ttWSeyKw View more Insurtech Innovator videos Learn more about Innovator's Edge

"We're going to allow consumers to do is see all of their insurance in one place in an aggregate view and we can do that because the InsurIQ platform enables the digital purchase and delivery of insurance and the fully compliant management of insurance products on behalf of all of our customers," says Brian Harrigan, founder and CEO of InsurIQ https://youtu.be/2n8Xfyxx6Yo View more Insurtech Innovator videos Learn more about Innovator's Edge

"Care Bridge International offers the first big data solution to forecast medical exposure for the claims vertical at an individual claims level," says Deborah Watkins, CEO of Care Bridge International https://youtu.be/PpmyfAea9GE View more Insurtech Innovator videos Learn more about Innovator's Edge

"Wellthie offers the first-of-its-kind small business benefits marketplace that brings together the top carriers for medical, dental, vision, life and other value-added services into one comprehensive platform that really enables that small business to find the best benefits for them," says Sally Poblete, founder and CEO of Wellthie Inc. https://youtu.be/ARm4KvP2VkA View more Insurtech Innovator videos Learn more about Innovator's Edge

At the beginning of this year, Deloitte released its predictions for the insurance industry. Topping the list of priorities was the need to “expand digital distribution and virtual service to cut costs and gain competitive advantages.” For insurers who have relied exclusively on independent or captive agent workforces, the way forward is unclear. How do they establish a digitally based, direct-to-consumer presence when many haven’t yet stepped onto the digital stage? The Current State of Digital Readiness in Insurance According to Aite Group, only 20% of auto insurers and 7% of homeowners carriers are currently selling products online, despite the growing number of consumers that are choosing to use these channels. “Many insurers are tied to core policy admin systems that originated in the last century,” said Rick Huckstep, industry influencer and thought leader at The Digital Insurer. “They remain constrained by the legacy of a pre-internet, analogue way of working.” These systems, built with a 20-year life expectancy, were entering their twilight years before the current digital revolution, so it’s no surprise that they account for up to 80% of insurer costs. Even more troubling, according to Huckstep, they represent a significant impediment to establishing a digitally-based direct-to-consumer strategy. For insurers who have focused exclusively on external agent channels for distribution, the situation is more severe. While they usually have a basic one-dimensional web presence, many of these insurers haven’t begun to think about how they are going to establish an attractive online storefront, let alone how they will tie legacy systems into the web frontend. See also: Why More Don’t Go Direct-to-Consumer   Implementing a Direct-to-Consumer Strategy In our recent research, 73% of insurers reported consumer demand for D2C channels of engagement, but only 23% were satisfied with the results of their digital efforts. To be effective, a comprehensive digital strategy needs to tie together all of the key elements related to the customer experience. For insurers relying exclusively on independent or captive agent forces to sell their products, the three principles below provide a starting point to add D2C channels of engagement into the mix. Focus on Customer-Centricity When Amazon came on the scene in 1994 selling books and records, it already had a vision of becoming an international seller of almost everything. Since then, the retailer has evolved into the premier online merchant, setting the standard for customer engagement in the digital world. Looking closely at Amazon’s example, insurers can learn a lot about developing a D2C strategy. First, even if it seems beyond imagination in the beginning, plan for the end result. Setting up an online storefront may seem like your biggest challenge today, but where are the technology trends going? Robotics and artificial intelligence are already improving workflows, and blockchain is waiting on the horizon. Incorporating the digital basics that are available into your distribution strategy provides a base to integrate future advancements as the market changes. Next, make it interactive. Amazon does more than sell everything under the sun. It interacts with shoppers, offering product recommendations that make it easy for consumers to find what they want at a price they are willing to pay. Insurers can do the same, gearing their web-storefront to provide product recommendations, alert consumers to gaps in coverage and advise on deductibles and policy limits. The message here is simple: Think of everything a target customer needs and then create the most efficient and customer-friendly way to deliver it. Plan for Better Data Handling and Access When it comes to data, insures have a lot of it, but, according to Aite Group, they aren’t making good use of it. Currently, insurers use a complicated mix of lead generation techniques, including purchasing leads from outside vendors. As leads come in, data is filed in its own repository according to coverage type, causing product siloes and often resulting in data inaccuracies across systems. As a result, insurers lack a single view of the consumer where every employee and system has the information necessary to engage in informed interactions with the customer in real time. Mark Breading of Strategy Meets Action calls this the ultimate view, and it’s essential to an effective D2C strategy because customers expect to interact with lightning-fast efficiency. Imagine you sign into your online banking site, but, instead of being provided a single account overview, you’re required to login separately to see each account. This is the type of engagement insurance systems are set up to provide today, and the experience that many customers receive when purchasing coverage online. They enter the site, input their personal information and are provided a quote for a single type of coverage. To inquire about other policies they may need, the customer is required to go through the application process again. If they need to make an inquiry with an agent, they have to provide the same information once again. Direct-to-consumer distribution requires the web frontend to be connected to backend systems in a way that unites product siloes and delivers a 360-degree view of the customer and related products. Establishing a Customer-Facing Call Center In the non-digital world, consumers and business owners look to agents and brokers for guidance on obtaining the appropriate coverage. In the digital realm, the best D2C platforms use consumer-entered data, as well as information from third-party sources, to speed the application process, minimize errors, identify coverage gaps and recommend options. So, what happens when a consumer needs to speak to someone? Even with direct-to-consumer engagement, insurers will need a customer-facing call center to answer questions and help with routine policy inquiries. Accenture recently surveyed over 32,000 consumers to get their thoughts on the insurance industry. When it comes to getting advice and answers to questions, as many as 86% of these respondents are open to receiving automated support but up to 62% still prefer to receive guidance from an actual person when they have a question or need advice. Insurers who rely exclusively on independents or captives will need to establish a separate customer-facing call center to support D2C channels of engagement. That call center will also need a cross-channel view to pick up the customer transaction right where they left off during their online interaction. Planning ahead could net big advantages; Bain reports an increase in customer loyalty when insurers provide multiple channels of engagement. Consumers also report higher levels of trust with omni-channel insurers because consumers feel that the company will work to resolve any issues, an important aspect of a happy customer-insurer relationship. The Importance of Partnerships Huckstep, Breading and other industry influencers agree: When adding D2C channels of engagement, insurtech partnerships are the way to go. Breading feels that the industry will be greatly transformed in 10 years — making it barely recognizable from what it is today _ and a large part of the change will come from insurtech innovation, particularly where distribution is concerned. See also: The Agent of the (Digital) Future   “Distribution is a hot area for insurtechs in personal lines and is already having an important impact,” Breading said. “Insurtech has been a major trigger for new insurer strategies and will be an important part of the transformation of insurance over the next five to 10 years.” According to Huckstep, insurtech platforms that build on the significant investment already made in legacy IT put insurers in the “fast lane” toward D2C distribution and outperform attempts at overhauling or moving to new policy admin systems. “The insurtech digital implementation can be measured in months and thousands of dollars (instead of years and millions),” Huckstep said. “Speed-to-market is the defining characteristic for these tech-enabled platforms.” At the end of the day, speed-to-market is what it’s all about. Accenture’s study revealed that as many as 51% of consumers are purchasing coverage online, but, according to Aite Group, less than one-quarter of insurers are selling direct to consumer through digital channels. That means a small number of insurers are reaping all of the rewards of digital distribution, while others, particularly carriers that sell exclusively through independent or captive agent forces, lose revenue and market share. I’d like to hear from carriers with independent or captive agent forces. Are you feeling the push from consumers to offer D2C channels of engagement, and what approaches are you taking to ensure that you have a presence in the new digital insurance economy?

This is the seventh in a series. The other parts can be found here. At the Insurer of the Future, products will be very different from nowadays. But how will they be developed? Certainly not the same way as now. To begin with, all products will be created as a series of modules. Modular design enables a myriad of new products to be developed quickly and easily. Even with just three modules — A, B and C — the Insurer of the Future can generate seven different products (A, B, C, A+B, A+C, B+C, A+B+C), and the options grow exponentially as more modules are added. See also: Time to Reinvent Your Products   How does the Insurer of the Future know when a new module is required? Because its real time analytics tell it what customers want, or might want, and an artificial intelligence system can figure out whether that want can be met from the existing modules or whether another one is required. If a new module is needed, those same artificially intelligent systems can carry out the coding required to build the new module, configure the new combination and publish the new product as an option available to be bought. It will then monitor take-up of the new product and iterate it as needed until sales are optimized. Of course, in this world, products are no longer siloed. Elements of what used to be called P&C, life, health, investment and decumulation products, together with covers yet to be dreamed up, are all now modules that can be combined to meet the precise needs of any individual, employee or business customer of the Insurer of the Future.

The insurance sector is now seeing the same dynamics many other sectors have already experienced — startups and other tech firms are innovating one or more steps of the value chain that traditionally belongs to financial institutions. Insurtech has seen extremely important investments in the last years, and the word “disruption” is coming out frequently in insurance debates. But I consider it a joke when an industry conference shows a picture of a newborn and sells it as its last intermediary or its last client to have purchased an insurance policy. How to start from the strategy looks like One U.K. insurer, MORE TH>N, addressed claims related to the obesity of the insured dogs. It invented a value proposition that provides the insurance coverage, adding all the preventive treatments a dog needs, a monthly box delivered to your home with the accessories and food that your specific dog needs and a pet tracker to nudge you to make the dog exercise more. Moving to insurance for humans, the South African insurer Discovery demonstrates incredible innovations. Over the last 20 years, the insurer has introduced new ways to improve policyholders’ lives using connected fitness devices to track healthy behaviors, generate discounts and deliver incentives for activities supporting wellness and healthy food purchases. Insurers were able to imagine and execute these exceptional innovations. For this reason, I’m positive regarding the future of the sector. I’m convinced that insurance companies will still be relevant in the future — or will become even more relevant than they are now — but these companies will have to be insurtechs or players who use technology as the main enablers for reaching their own strategic objectives. See also: Insurtech: How to Keep Insurance Relevant   Insurance IoT is one of the first insurtech trends to come of age. Sensors have become a ubiquitous part of everyday life, expanding to include people and businesses around the world — even while they connect us more intimately with those nearby and with ourselves, as well as with our homes, workplaces, possessions and increasingly, insurers. Today, there is more than one connected device per person in the world, and some analysts estimate 50 devices for a family of four by 2022. The insurance sector cannot stop this trend; it can only figure out how to deal with it. “Connected insurance” — insurance solutions using sensors to collect data on the state of an insured risk and telematics for remote transmission and management of that data — is the name of the game. Auto telematics is the most mature use case, but there are relevant innovative initiatives both on home and health insurance. Connected insurance is affecting the whole insurance value chain and generating real value for insurance P&L. The five main value creation levers are:

1. Behavior “steering” programs: leading the client toward less-risky behaviors, therefore reducing their claims;
2. Value-added services: developing client-tailored ancillary services that allow the insurer to deliver enlarged value propositions;
3. Loss control: developing a broad approach to reduce claim costs –acting in real time on the single situation to mitigating the risk before the damage happens and contain the damage –anticipating the claims management and improving reimbursement valuation, improving the efficiency of the claims process
4. Risk selection: creating value propositions able to attract fewer risky clients, improving the quality of the underwriting process based on the sensors’ data or increasing the efficiency of the underwriting process
5. Dynamic risk-based pricing: developing insurance policies with pricing linked to client individual risks and behaviors (on one side: reducing premium leakages; and on the other side: offering low-risk individuals lower prices to increase their retention and acquisition)

The connected insurance paradigm is based on the value sharing. In any business lines, insurers can, on one side, use the data from connected devices to generate a value on the insurance P&L, and, on the other side, build value propositions focused on sharing this value through incentives, services and discounts. The value creation equations will become more and more articulated with the diffusion of those approaches on the market, but that scenario will be characterized by relevant value sharing. You can figure out the level of positive externalities generated by an insurance sector that is able to change behaviors and prevent risks. I created two Insurance IoT think tanks — one dedicated to the North American market and one to the European one — consisting of more than 50 insurers, reinsurers and tech players and formed to discuss the insurance IoT opportunity and promote a culture of innovation in the insurance sector. From the discussion I have with them weekly, I believe the concrete and actionable five levers mentioned above will allow insurance carrier to exploit the value of the IoT data on their P&L. This approach represents a unique competitive advantage over any other players in the IoT arena. In this way, insurance carriers will stay relevant or become more relevant than ever. The benefits for the insurance sector of adopting this paradigm also include the increased frequency of interaction with the customer — a proven way to garner greater loyalty — and the unique opportunity to increase knowledge about customers and their risks. See also: The Insurance Renaissance Rolls On   It is a pity to hear futurologists at insurtech conferences imaging insurance IoT use cases as an AI within a connected home, buying insurance via smart contracts when the fridge needs maintenance or as an AI within a wearable watch buying insurance via smart contracts in case you are injured playing basketball. This will not be insurance — there isn't risk transfer or randomness (accidental and unintentional loss). Instead, the business model and the role of insurance companies are enlarged by this technology. The essence of the insurance sector — since its origin in 1347 — has been assessing, managing and transferring risks — but the direct results of the technology adoption are “superpowers” to do the same things much better.

Everyone knows that marketing now plays a key role in the success of an insurance business. And this is down not just to trends in distribution and brand, but to digital links with underwriting as well. Moving from the periphery into the heart of a business has consequences, though. Being in the lens of regulatory scrutiny is one of them. See also: The 6 Principles of Persuasion   Insurance firms in the U.K. are currently weighing new regulations that introduce the concept of a “significant harm function.” This is defined as a role that might involve a risk of significant harm to the firm or its customers. Some firms will complain about how broadly it’s been worded. Others will understand that they’re expected to work it out for themselves. So what “risks of significant harm” could marketing create for a firm? Here are six for boards to consider.

1. Marketing is collating a great deal of the data that is now influencing the underwriting of customer risk. As underwriting encompasses an ever growing range of factors (a thousand factors for motor risks is not unusual), the veracity of such data grows in importance. This active pre-qualifying of risk weaves marketing into the outcomes generated by underwriting and in doing so, changes its “harm” profile.
2. Some of the digital techniques that marketers are adopting to segment consumers introduce a significant risk of biased decisions. Research is raising questions about the fair and equal treatment of consumers from algorithmic decisions. Actively addressing these risks is part of the marketer’s responsibilities.
3. The days of communicating with consumers on a one-to-many basis are ending. All that data now allows personalized marketing, on an almost one-to-one basis. And it’s forever changing and adapting, following the flow of consumer behavior. How, then, do you monitor this? The signing-off of a campaign becomes impossible. It comes down to key marketing personnel recognizing and responding to a more sophisticated set of responsibilities.
4. There is now a digitalized marketplace that sees marketers using chatbots to simulate conversations with consumers could see ethical consequences. How those chatbots are trained to engage with consumers introduces mis-selling risks that could scale exponentially unless appropriately overseen. Responding to such exposures will require marketers to learn new skills.
5. Another choice facing insurance marketers is whether to adopt nurturing techniques that are becoming common in other business sectors undergoing digitization. These techniques use data and personalized marketing to move consumers into a context that would usually trigger a purchase response. This would see firms move from using behavioral knowledge to understand consumers, to using it to manufacture sales opportunities.
6. As marketers increasingly take on the role of “the customer voice” within a firm, and as that firm seeks to engage more personally with customers, and as the balance between risk transfer and risk management within some insurance propositions changes, so does trust in the firm’s reputation come under tension. There’s a serious conflict of interest among all this, which the board, having responsibility for the firm's reputation, needs to be sure marketers are managing effectively.

So what are the implications of marketing being designated as a significant harm function? More oversight, for sure, but isn’t that just commensurate with those widening responsibilities? A small price, perhaps, for marketing to be able to sit at the top table with finance and underwriting. See also: 4 Marketing Lessons for Insurtechs   What marketers can bring to that table is customer insight. Yet because that insight comes from new techniques for analyzing those vast lakes of big data, it introduces what could be called “slingshot risks,” ones that a little algorithmic decision making can send out far and wide across a business, producing exponential impacts. It’s that capacity for exponential harm that, I think, makes marketing a real candidate as a significant harm function. Marketing is entering a new era of accountability

A particularly pernicious American healthcare myth holds that costs are out of anyone’s control. Health plans and benefits consultants often convince organizational purchasers that costs simply are what they are — and that no better alternatives exist. Nothing could be further from the truth. In fact, there’s reason to believe that a new crop of “high performance” healthcare innovators could make healthcare more rational. The question is whether employers and unions will embrace the high performers, independent of their health plans. Are they sufficiently frustrated that they’ll step outside the poorer performance conventions placed on them by health organizations invested in the status quo? The marketplace is exploding with high performance healthcare companies in various high-value niches, founded by evidence-driven leaders with deep subject matter expertise. Each has rethought some clinical, financial or administrative problem and developed a different, better solution — with improved health outcomes or lower cost — than the conventional approach. See also: High-Performance Healthcare Solutions   Take musculoskeletal disorders (MSDs), which typically represent 20% of group health spending and 60% of occupational health spending. One company has developed treatment pathways that let it intervene in 80% of cases, and rigorous quality management allows continuous improvement. After more than 100,000 patient encounters with commercial populations, the data show that, compared with conventional orthopedic care, its clinicians obtain dramatically better pain reduction, enhanced range of motion and improved activities of daily living. Recovery time and costs are cut in half. Three-quarters of surgeries are eliminated, imaging drops by half, and injections are reduced by more than one-third. The organization is so confident in its capabilities that it will financially guarantee a 25% reduction in MSD costs. This usually translates to at least a 4% to 5% savings in total healthcare spending. True savings are generally higher. Similar results are available within a variety of high cost sectors. Managing drugs can drop total spending by 7%. Managing imaging reduces costs another 6%. Similar savings, with enhanced health outcomes, are available by properly managing cardiometabolic care, oncology, dialysis, allergies, surgeries, etc. Managing financial processes, like moving to reference-based reimbursement and closely reviewing medical claims, are additional ways to streamline healthcare costs. Why, you ask, doesn’t your health plan make these services available? It’s not currently in their interest, because, at the end of the day, most health plans make more if healthcare costs more. And they’re usually not interested in antagonizing their network providers, even if they’re not high performers. Resistance to change Worse, while a growing group of benefits advisers and managers are seeking new value through the innovators, the bonds between mainstream health plans, benefits advisers and employer benefits managers are usually rock solid and resistant to change. If an alternative solution is firmly in the interests of the health plan and the adviser, the benefits manager may be loath to disrupt that relationship, especially if the new solution is going to need care and feeding beyond what’s currently required. So even if the high-performance offering delivers better health and significant savings, getting it on the plan may be a hard sell. Even so, the budgets and patience of many businesses and unions are exhausted. Think school districts: They’re often willing to think differently if it’ll relieve their financial pressure, especially if they’ll get better health outcomes in the bargain. They’re receptive to considering programs that can deliver better results. That’s the way these programs — think of them as modules — are entering the marketplace now. An employer says, “Sure, let me amend my summary plan document and I’ll try the musculoskeletal disorder management and the claims review modules. If those work, let’s think about imaging.” When the savings materialize, they’ll gush to their benefits manager pals. So, one program at a time, healthcare will begin to change. Now imagine what might happen if you put several of these modules under a single health plan structure. You could pass along the cumulative savings of each in the form of lower health plan costs. Consider what might happen if you could, say, guarantee a benefits manager a 25% reduction over current healthcare spending, with better outcomes. That would be an offer that she couldn’t refuse, especially if her CFO heard about it. See also: Healthcare Debate Misses Key Point   The high-performance modules I’ve described are in the market now and are available to innovative purchasers. The trick is identifying and vetting them so purchasers are comfortable that they actually deliver. The larger idea of high-performance health plans is under development now, as well, and we should start to see some in early form in the next year or so. The results consistently available in these high-performance healthcare organizations’ offerings clearly reflect the tremendous, corrosive slop in the U.S. healthcare system and represent a better way forward. If these high-performance modules can get a foothold in the marketplace, their spectacular value propositions might overcome the health industry’s relentless focus on driving high-priced excess. That could begin to change everything for the better.