Jay Weintraub, CEO and founder of InsureTech Connect, talks with Innovator's Edge CEO Wayne Allen about the growth of the annual event, and how its success is closely tied to how well the insurance industry succeeds at innovation.

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Nino Tarantino, North American CEO of Octo Telematics, talks with Innovator’s Edge CEO Wayne Allen on how his company's leadership in telematics is enabling insurance innovation, and what next steps are for innovation at Octo.

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Traditional group and voluntary benefit markets are growing, especially in those areas such as critical illness and vision and any benefits that enhance the quality of life. Lifestyle products, such as pet insurance, health club memberships, legal coverage and identity protection are also on the rise. Carriers, however, may not have fully capitalized on the growth due to the need for innovations that necessitate digital technology advancements. Insurers need to rethink their strategies to capture new opportunities for growth. With low unemployment rates and demand for knowledgeable employees across all industries, potential employees have more choices.  With those choices, group and voluntary benefits, while still widely used in many companies, are an intensifying pressure point for insurers to provide value and compelling tools for marketing, enrollment and service. And, given that many small to medium-sized businesses are some of the fastest-growing but still underserved due to the lack of cost-effectively reaching them, all this adds up to an increasing gap between what the market wants and needs and what group and voluntary benefits insurers are able to deliver. Everyone is dissatisfied on some level. Employees choices are expanding in a low employment rate market.  Add to this the shift from people staying with a company for their entire career, to changing jobs regularly to gain different experiences.  Further complicating this is the increasing shift to the gig economy that demands the ability to port insurance to an individual level. Employers of every size are faced with providing more choices to attract talent and remain competitive, but they need more diversity of offerings and they need to be sold and serviced with more digital methods than they are now. See also: Group Benefits: the Winds of Change   Insurers, representing different segments, from traditional Group to Worksite, P&C, healthcare and new market entrants, see the trends and opportunities. They see what employees are demanding and what employers are wanting. They need to reach a broader market, especially small-to-medium businesses that can supply growth. Their systems, however, are legacy-based, with little digital engagement, minimal ability to innovate with new products, ability to integrate new value-added services or easily allow portability of benefits to an individual policy level, allowing insurers to retain and grow their client base. Everyone agrees there is opportunity. A growing number of insurers, MGAs, brokers and new entrants see the group and voluntary market as ripe for innovations that will drive growth. Healthcare insurers, for example, have been saddled with exchange issues and mandatory coverages. Service expansion within employers could mean more “wallet-share.” Traditional voluntary insurers see opportunity in digital and automated service for bridging the gap to reach small-to-medium businesses at scale. Where agent service is less feasible, digital service meets SMB criteria for ease of service. Traditional worksite insurers may be in a stronger position to deal with individual policies, but they are now eyeing new marketing methods, channels and affinity partnerships to gain access to SMBs and niche groups. They see direct sales and robust portals as additional pathways to growth. Property and Casualty insurers are also in the mix. Many of them have relationships with SMBs, and they are looking for ways to expand service within existing clients. For any of these insurers, technology solutions can help open up opportunities, but they must first understand what the market wants and pair those needs with the right solutions. What do SMBs really want? Though many of these trends and drivers apply across all size businesses, SMB trends are like gold in the mine — there are opportunities that remain untapped. In many ways, SMBs look and act like the consumer market. For example, in Majesco’s SMB research, we found that SMBs were open to purchasing business-related insurance through an online retailer like Amazon or an exchange similar to Health Care Exchanges.[i] That’s a signal that group distribution to SMBs could take a new approach. In what other ways are SMBs similar to consumer markets?

• They are thirsting for products that will lower their risk
• They are not unwilling to share relevant data if it gives them discounts or added protection.
• They are ready for easy-to-understand, and easy-to-purchase solutions.
• They are willing to break from tradition.
• They long for personalized service.

What do employers of all types really want? Human Resource departments are overburdened with complex benefit administration. One thing that would help, would be for insurers to simplify both HR administration and employee administration of their own plans. Employers spend more time each year, attempting to educate employees on their benefit options. Anything that an insurer can do to either simplify their packages or improve their communications is valuable. Employers also appreciate it when one insurer can put together packages of multiple products, so that they don’t have to operate a la carte for a dozen different insurance providers. And, they appreciate non-traditional benefits that will make their benefits package look valuable to both current employees and new hire prospects. This all ties into what end consumers really want: clear choices, clear communication, broad selection, reduced complexity and the value gleaned from group buying power. Knowing all of this, what do Group and Voluntary benefit providers really need? What has been holding many insurers back is an emotional tie to an economic reality. They may see opportunity in small to mid-size companies, but they know their legacy systems and channels do not easily engage or support these companies.  Insurers are wondering, “How can I make this business work digitally, so that we can grow this market effectively? If we can’t build a business case, we can’t make an investment.” See also: Integrating Group Life and Voluntary Benefits   First, of course, group insurers need flexibility so that they can think and operate innovatively with new product, marketing and distribution possibilities. The business case has to account for harvesting business in new ways. Insurers need systems that can handle any size business … but especially small to medium businesses as efficiently as they can handle groups. The answers lie in technology improvements such as:

• Modern risk management solutions with updated data and analytics that will feed relevant information to underwriting.
• Top-tier rating capabilities with templates, rules and calculations for group products.
• Better CMS capabilities and better digital capabilities for communication and personalization, with portals that will assist employers, brokers and employees with enrollment and self-service.
• Technologies that support agile moves, with easier product modeling and testing and pre-built frameworks.
• Cloud environments that won’t require massive capital investment.

Group insurers need end user engagement for better underwriting and to shift focus to preventive care. Wearables and other technology advancements have certainly helped, but there is room for more. So, how will all of these needs and all of the changes in the group market drive technology investments? Is it possible for traditional group and worksite providers to keep an edge on incumbent players in the group market? With the proper planning and implementation, a cloud-based group system can be a unification point for many of an insurer’s systems and processes. In our next blog, we will take an in depth look at technologies that will bring group capabilities to life. It is an exciting time and I hope that you will see group and voluntary market drivers as signposts for change. This article was written by Prateek Kumar.

The earlier articles in this series can be found here.  Last year, I moved from the U.K. to the U.S. I tried to arrange insurance directly with the brand names I knew best – but it quickly got difficult. I didn’t have a U.S. credit history, I didn’t have a U.S. insurance history, and I’d only just got a U.S. job. I realized I needed a broker. See also: How to Support the Agent of the Future   That broker was Michelle, and she worked wonders for me. She got me the covers I needed, at a good price, at the right insurer for my circumstances. She was thoughtful, courteous and speedy, and I’ve been delighted by her service. As far as I’m concerned, Michelle earned every cent of her commission. But I never met Michelle. I never even spoke to her. Everything we did, we did by email. Which got me thinking – how do I know Michelle isn’t an artificial intelligence (AI) system? For the Insurer of the Future, I think she will be. In the future, there’s nothing Michelle did for me that couldn’t be done by a properly trained, and properly connected, machine. In the Insurer of the Future’s world, human brokers won’t be needed any more. I can guess what many of you are thinking: “Hah! Let’s see how much he likes a remote machine when his basement floods.” And you’re probably right. In those circumstances, I might indeed want someone to come and (metaphorically) hold my hand. But if my basement floods, and a real person does turn up, and she tells me her name’s Michelle – won’t that give me what I need? I think so. If I need a real person, I’ll be happy that a real person turns up. They don’t even need to be an agent or broker – the Insurer of the Future’s on-site claims handler will be fine, thank you very much. See also: Insurtechs: 10 Super Agents, Power Brokers   Some tell me I might be right for personal lines, but commercial lines is more complicated. Well, yes – a lot more data will typically need to be located, analyzed and acted upon. But locating, analyzing and acting on data is exactly what machines can usually do better than humans. Which means it’s even more likely that commercial lines brokers will be disappear.

According to a recently published white paper, insurance carriers can best deal with natural disasters by leveraging an on-demand model that gives them immediate access to an affordable and scalable workforce. By using workers in the field only when they need them, carriers can control costs while quickly and effectively meeting the needs of policyholders. Natural Disasters Are Getting Stronger and More Frequent ClimateWise, a coalition of the world’s largest insurance carriers, has reported that since the 1950s the frequency of weather-related catastrophes has increased six-fold. Not only have more than 20 storms causing a billion dollars or more in damage taken place since 2010, seven have hit since 2016. All of these storms have kept carriers busy assessing damage and processing claims. Days after Hurricane Irma made landfall in 2017, more than 335,000 claims had been submitted in Florida totaling $1.9 million. That’s according to Florida’s Office of Insurance Regulation. However, the storm is predicted to eventually cost close to $100 billion. See also: Do Natural Disasters Matter To Me As An Insurance Buyer?   Nearly 88% of these initial claims were made by residential property owners. And, more than 10,000 business owners have reported damages from the storm. If the predictions are accurate, the damage from the 2017 hurricane season would more than double the costliest season on record in 2005. That was when Katrina and three other storms caused more than $143 billion in damage. And it’s not just hurricanes that are keeping carriers busy. During the first half of 2017, 49 weather-related disasters hit a wide range of locations across the U.S., including ferocious tornadoes and damaging hailstorms. And, most recently, devastating wildfire outbreaks in Northern California destroyed thousands of structures and caused more than a billion dollars in damage to the world-famous wine region. Carriers Face Workforce Challenges One of the major challenges that carriers face during times of catastrophe is how to deploy enough workers to the field to assess damage associated with claims that arise. Traditionally, carriers have understood the value of inspecting assets in-person in the field. However, maintaining an infrastructure capable of quickly completing these inspections in any location across the country has become cost prohibitive for most carriers. It’s not that carriers are understaffed. It’s just that carriers’ workforces are spread too thin in times of crisis. As we saw in Florida during and after Hurricane Irma, many of the state’s adjusters were on the front line still working on claims made after Hurricane Harvey hit Texas. A Scalable Workforce is Accessible Carriers are operating in a cost-sensitive and hyper-responsive market. Even the most sophisticated and progressive carriers often find themselves struggling to effectively deal with scalability issues relating to managing a local, regional, or national adjuster workforce. Thankfully, natural disasters don’t occur every day. So, how do carriers manage their workforce to handle the surging need for workers after a disaster strikes as well as the lulls that follow? If they hire more full-time or part-time workers, carriers are in the position of laying them off when the disaster is over. This hiring and layoff cycle represents a huge challenge to HR departments. That’s because there is a significant administrative cost associated with recruiting, hiring, and onboarding new employees. See also: Harvey: First Big Test for Insurtech   What carriers need is a geographically-scalable workforce that is adaptable to regional nuances. This scalable workforce is made up of gig workers, also called on-demand workers. Final Thoughts A variety of breakthrough technologies and workforce alternatives are inspiring a fundamental transformation of the insurance industry. How well carriers interact with policyholders and gather information in the field will depend on how effectively the industry begins to take full advantage of the on-demand workforce to increase efficiency while lowering costs. The key to responding to natural disasters – and keeping policyholders happy – is to rely upon an on-demand model. This model is capable of supplying an affordable workforce that can be scaled up or scaled down at a moment’s notice.

Today, most people are driving in semi-autonomous cars, or semi-self-driving vehicles, whether you realize it or not. So you may have nice specs, alloy rims and some cool new tricks: contactless keys, dynamic cruise control, parking assist, self-correcting lanes, a bunch of other mini-innovations that improve the driving experience for you personally and anyone driving with you or around you. These “minivations “ are just the start. We know that roughly 93% of all vehicle accidents are caused by human error. Almost $1 trillion a year is spent on auto repair. Sit back and question that for a second, and that’s when you realize that all of this money – nearly $1 trillion! – is being dropped right into the pockets of the auto repair companies and the physical parts manufacturers. Traditional original equipment manufacturers (OEMs) are showing a glaring absence of innovation when it comes to preventing deaths. There are roughly 30,000 deaths per year due to auto accidents in the U.S. alone. To repair the auto industry and its surrounding ecosystem, the loss of lives must be addressed. How? Through autonomy. If you can take the 93% of human error caused by accidents down to 20%, 10%, 5% and ultimately under 3% with a (level 2, 3, 4 and 5 autonomy) vehicle, what will happen? First, you save lives (and the costs of healthcare). Second, you collapse an entire business model. You effectively shine light on the inefficiencies and economic costs absorbed by individuals. See also: Which to Choose: Innovation, Disruption?   This is where our favorite subject enters: insurance. Traditional insurance. The intangibles and untouchables: The Benjamin Buttons of Innovation! Enter simple math. Look at the premiums you as an individual pay relative to the cash outlay that the insurance companies must make due to accidents. Do you see it now? To say that the business models of the incumbents in auto insurance will shift dramatically is an understatement. This concept – a company without a tangible product that makes money off the liabilities they have on their balance sheet by means of your deposits – is going to pay for stagnation by means of obsolescence. Now a reversal occurs – individual empowerment amid institutional disempowerment. The next generation of insurance companies (insurance-as-a-service, insurtech, ethical autonomy, you name it) will naturally, inevitably and ultimately rise to the top of the pack and take share away. It is only sensible, therefore, to presume that the future of auto insurance is fascinating in a world where the metadata becomes statistically significant as it intersects with the data of connected vehicles. Why? Because now I can just pay as I drive. A true service (finally!). A pay-as-you-go business model that is as exact as it is precise. So, I – as an individual, an owner, leaser or driver turned rider – am no longer an “average" anymore. This is the concept of hyper-personalization, hyper-humanization and hyper-empowerment. There is an excellent example of hyper-personalization where I know precisely how many miles I actually drive, and the only premium I pay for insurance is for those miles. Furthermore, what if I as the user can actually obtain insights into my driving behavior (i.e. hard brakes, speeding, etc…),further influencing coverage premium and empowering me to drive behavioral change (no pun intended) with analytical insights and recommendations. In fact, the business model has already been created in form and substance. It exists today – there are insurance companies offering that solution as we speak, and I suspect it will increasingly become the standard. It will be interesting to see which insurance companies become print newspapers, which ones become blogs and which ones have left ancient history to trade perhaps one fiscal year for the opportunity to pioneer the next frontier. But before we embark across the Rubicon, let’s take a brief step back. By 2020, we will live in a world with 50 billion connected products. The enormity is surpassed only perhaps by the complexity. So if you are at a company right now that is just starting to feel pretty good about your position along the intelligence of things continuum, really good about your digital marketing team’s evolution, your grasp on social media/SEM/SEO, your grasp on building a multi-channel experience, your grasp of what your customer wants, enjoy the feeling --you’re about to be disrupted. Amazon ring any bells? See also: How to Respond to Industry Disruption   And you’re going to get disrupted in a way that’s staggering in its infinite nature, with infinitely more data points, infinitely greater opportunities and, as a result, infinitely more options amid a sea of competition, which makes you feel infinitesimally small. Suddenly. This competitive force has built such a commanding, unexpected lead. Yes, a good, old KO before you even heard the bell go off. You will likely default, and it will be too late to pivot. For the lucky, the ability to slip into obsolescence and appreciate the nostalgia of the past will do. (Of course, not the positive vibe-nostalgia, the punch-drunk love of sentimental warmth. Nope, as you become a relic of history, the nostalgia will be more like the Greek word root for nostalgia, which translates to pain, or more specifically the debilitating and often fatal medical condition expressing extreme homesickness). Why will you get disrupted? Because we’re going to fast forward parabolically toward predictability and optimization. And that is precisely when machine learning takes place -- that is when the machines become smart. As machines become more intelligent, they start to recognize patterns. Then they start to actually give you advice, input. Next, they start to predict what the outcomes could be, output. I/O. That, well, leads to artificial intelligence. To be continued….

The first part of this series can be found here. The digital insurer uses fusion to leverage the power of data — i.e. content. So what is fusion? It is a platform, with a new architecture from the ground up, designed for molecular binding of transactional, analytical and engagement capabilities. This is not a retrofit architecture but a complete redesign with fusion at its core. The fusion of transactions, analytics and engagement capabilities is only possible with an architecture designed with common capabilities across processing, insights and engagement needs with a strong “find and bind” integration architecture to tap into an ecosystem of innovative services. It is open to non-native components, supports rapid change to adapt to shifting industry needs and allows for continuous innovation. It can generate analytics and calibrate the customer-centric solution without losing speed or increasing total cost of ownership. Content is one of the most underutilized assets in insurance but is quickly becoming a strategic asset in the digital era, so it is helpful for us to understand all of the types of content that reside within the content chamber of the digital fusion reactor. Here is a non-exhaustive list:

• Regulatory data (rates, rules, forms)
• Internal data compiled over time — such as customer, transactional and actuarial data
• Localized data (region or country-specific)
• External data related to risks and underwriting (MVRs, MIB, Rx, usage patterns, GIS, climate information and more)
• Social media data, social preferences, customer sentiments, buying behaviors, satellite images, etc.

Content is no longer defined as that which is stored within the enterprise but as all data that is accessible to the enterprise. At this point, it is not only about having all these data streams available but also having the ability to bring diverse data sets together with a context for building insights to realize their competitive advantage. So a practical definition of content is: all the specific data about a person or business that allows you to rapidly set up a product and assess the risk specific to the customer based on their unique situation, region and risk profile. The better an insurer is at using applying fusion to their content, the more value their data will produce. Traditionally, content has been indigenous to individual apps — transaction-systems data was not easily accessible by engagement systems without building expensive wiring. Insights generated from analytics systems are often not actionable at the point of sale or service. The content platform helps liberate the data from apps to centralize data access and storage. In short, apps without content is like a body without a soul. A true digital platform architecture must support these to enhance the benefits of apps with internal and external content. And, most importantly, it must exist within a content framework that automatically updates itself when the situation, regulation and information changes. Content should reflect current reality. See also: Finding Success in Core Systems   In my next post, we’ll shift the discussion to “Chamber 3: The Customer Journey.” How does this fusion of apps work toward keeping customers engaged? Will it truly improve the customer experience and our knowledge of customers? I hope you’ll join me as we work toward becoming digital insurers who are focused on transformation that will yield real growth. This article was written by Manish Shah and originally appeared on Majesco.com.

Following our last post, Insurance Nexus Global Trend Map #1: Industry Challenges, it is now time to address the elephant in the room. Speak to any insurance industry pundit, and he or she will talk about an impending shake-up — a sudden obsolescence of traditional carriers in the face of leaner, nimbler competitors and disruptors under the banner of insurtech. It is interesting to step back and examine the material impacts currently being felt by today's insurers. So, is disruption all it's cracked up to be? As part of our Trend Map, we conducted an extensive international survey (with more than 1,000 responses) and consulted 50-plus industry thought leaders; you can find a breakdown of our survey respondents, details of our methodology and bios of our contributors by downloading the full Trend Map here. Along the way, we asked our insurer respondents whether they were losing market share to new entrants (giving us a disruption score). See also: Global Trend Map No. 1: Industry Challenges   In total, 29% indicated losses. While the majority still appear unaffected, this still represents a significant material impact. Different markets mature at different rates, and our disruption score fell to 23% in Europe and 25% in North America but rose to 47% in Asia-Pacific. The impact of new entrants is therefore greatest — or, at least, is perceived to be greatest — in the East. This is not a wholly surprising result given that the overall market in this area is expanding so fast because of the rapidly emerging middle class (especially in places like China and India), as well as large uninsured populations coming into focus at the lower end of the market. An expanding market creates more opportunities for new companies, and existing companies must grow at a high rate just to maintain their existing share. In addition, there may be a psychological factor driving the percentage of respondents, indicating market-share loss in Asia-Pacific. People may perceive the threat from new entrants more keenly here than elsewhere, even if they are not currently losing real market share. In saturated markets, the risk of total disruption is less because traditional insurance is established as the solution to a certain set of problems. In under-penetrated Asia-Pacific, however, many people have never had insurance and, therefore, do not owe any kind of allegiance to established insurance forms. This means that traditional insurance models appear particularly ripe for circumvention by non-traditional players.

“Successful innovations must be closely coordinated with the company's strategy. They require an innovation process and involvement from all areas of the company. On the one hand, it is important to constantly improve existing products and services. On the other hand, it is essential to think outside of the box: Artificial intelligence, augmented-reality applications and buying a fintech company are examples that fall into this category.” —Monika Schulze, global head of marketing at Zurich Insurance

Just because the European and North American markets produced lower disruption scores does not mean the waters are clear; we need look no further than the fact that more than half of 2016’s insurtech deals took place in the U.S. to see that the situation is much more complex. We should bear in mind the psychological factor and the hype cycle, whereby technology impacts are often overestimated at first. The wave is always biggest when it breaks but may leave little behind it other than foam. Later, in our regional profiles, we loosely applied this wave model to our three key regions, drawing on stats from our key themes section and input from local commentators. In North America, the disruption wave is still rising; in Asia-Pacific, it is breaking; and in Europe; it has broken. Download your complimentary copy of the full Trend Map here! In this sense, these scores are perhaps more revealing as indicators of each market’s maturity than of the overall extent of disruption. While newcomers will continue to take on market share for the foreseeable future, carriers’ assessment of this threat may, paradoxically, adjust down as they take on a new normal.

“The common denominator that’s sweeping the industry right now is this whole wave of insurtech. It applies to anybody and anywhere in the world.” —Hilario Itriago, CEO at Bullfrog Ventures

This new normal will, by no means, be totally inimical to today’s insurers. While some insurtechs have incumbents in their cross-hairs, many new startups will simply end up replacing the more tired parts of insurers’ stacks with something better. And once the gloss has worn off, many insurtechs’ currently belligerent stance may well soften into something more cooperative — particularly given the mutual benefits that could come from newcomers and incumbents working together, in a marriage of scale and innovation. We further explore insurer-insurtech collaborative models in our regional profiles, which you can access by downloading the full Trend Map here. Disruption is not just an issue for carriers; it affects every player in the insurance ecosystem and every category of insurance work. The balance of industry chatter suggests that brokers and agencies will be the first part of the insurance value chain to feel the pinch —for example, through disintermediation by new direct plays and robo-advice. Interestingly, the rest of the industry (everyone apart from carriers) achieves a disruption score of 20%, lower than the 29% we registered for carriers, and this trend is consistent across our three key regions (see above). Again, this may reveal more about sector maturity than material realities. The fact that indirect channels have, for a while, been an obvious target — not just for insurtechs but for incumbents’ own direct offerings — could mean agents and brokers have come to perceive the threat more realistically than carriers, which may currently be in peak panic mode. Before we move on to our next post, on insurer priorities, let’s quickly review the state of insurtech at present. According to data from CB Insights, total insurtech investment in 2016 totaled $1.7 billion, around double what it had been in 2014. This compares with the $17.4 billion invested in fintech overall in 2016 (according to data from PitchBook). Insurtech has been slightly longer coming than tech disruption in other branches of financial services, but its role in insurance — a data industry par excellence — could be even more transformative. See also: Prospects for Insurers as a Global Industry According to a recent report from Accenture (“The Rise of Insurtech”), approximately half of insurtech investment money is being funneled toward artificial intelligence (AI) and IoT. Currently, personal lines are generating more activity than commercial lines, and life is the quietest of the major branches; this picture is broadly borne out by our more general stats across the Trend Map. This may be a case of people going after the lowest-hanging fruit first rather than anything inherent in these lines — there remain a multitude of untapped opportunities here, from realizing backroom efficiencies, to innovation out in the field (especially anything IoT-related for commercial insurance). We will be returning to the topic of insurtech — and, in particular, where it fits among the mega-trends at work in the industry — across the remainder of this content series, so stay tuned. If, however, you want to get your fix right away, you can download the full Trend Map for free whenever you like. In our next installment, we will see where carriers are focusing their time, money and human resources.

The other entries in this series can be found here. As we’ve seen in previous parts, the Insurer of the Future will have far fewer employees in pricing and underwriting, in claims, in product development and in the back office. Overall, therefore, the Insurer of the Future will have far fewer employees per million of premium than its predecessors. Many tasks previously performed by humans will now be delivered by software. See also: The Key to Digital Innovation Success   But that means that the remaining humans, fulfilling key strategic and risk management roles, are far more important than they were. They will have to be the very best professionals available. Their recruitment, training, development and motivation will have to be top-notch. They’ll need the very best of support to help them be successful. They’ll have self-help tools at their fingertips, expert systems support, world-class knowledge management capabilities and collaboration tools to ensure they can deliver to their full potential. They’ll be part of a culture that is dynamic and exciting, in an environment of constant change – and they will relish every minute of it. Chances are that, on average, they’ll also be significantly better paid. See also: Where Are All Our Thought Leaders?