It’s been a hectic four months since our last Transparency Chronicle, during which we launched major products and geographies and took a stand on gun violence. With Thanksgiving just ‘round the corner, I want to reflect on how these milestones have been received, and share five things that we, Team Lemonade, are thankful for. 1. The Exponential Power of Technology Our Live Policy rolled out in August, allowing members to change or update their policy coverage instantly, and with zero hassle. Its impact? Well, nearly a quarter of Lemonaders have already used it to update their policy! That’s many thousands of people who bypassed the insurance maze simply by tapping on their app. The Lemonade Live Policy highlights one thing we’re thankful for: the power of technology to lower costs while raising the bar. It’s amazing what you can do when you replace brokers with bots... 2. Controlling Our Destiny Zero Everything launched in September, and we think it’s a game-changer. When your $1,000 laptop is stolen, you expect your insurance to cough up $1,000. But that’s not what happens. First, they knock off $500 for the deductible, then they hike your rates, and then the paperwork begins. It drives people crazy. It’s not malicious, mind you. Big insurers hate ‘nuisance claims’ (their term for your filched laptop) for good reason: it can cost them more in paperwork than the amount you’re claiming! Given how their bureaucracy functions, deductibles and rate hikes are perfectly ‘rational.’ That’s where A.I. Jim, our claims bot, changes the game. A.I. Jim loves small claims. He can settle them on the spot, with zero hassle and at no extra cost. So if you opt for Zero Everything, you get 1 dollar for every 1 dollar lost: full replacement value, zero deductible, and no rate hikes. Customers seem to really appreciate Zero Everything: Interestingly, the adoption of Zero Everything in Texas was twice as high as in California, which was 50% higher than Illinois! Curious. Zero Everything highlights the second thing we’re thankful for: controlling our own destiny. We have ambitious plans for changing the underlying insurance product, and we couldn’t do that if we were just a broker. Innovations like Zero Everything require breakthrough tech, sure, but they’d be impossible without also controlling our own underwriting, claims, and regulatory relations. To truly remake insurance you need to be a full stack insurance company, and a technology company. Neither one, on its own, will cut it. See also: Lemonade Really Does Have a Big Heart   Building everything from scratch was the ‘long short way,’ but we’re thankful we took it! 3. Our Tech Community The Lemonade API launched in October on Product Hunt, and opened Lemonade to the world. There’s this magical alignment of interests that happens when you open up to the community: new revenue potential for the host platform, and a quicker and cheaper way to launch new products to market. Plus, it just makes sense when you’re a tech company. The reception? Over 400 businesses applied for early access to our API in the first 24 hours! Here’s a breakdown of who registered: APIs create a common language among tech-enabled companies across diverse industries. It means our bots can replicate endlessly and appear concurrently through a gazillion websites and apps. We think that’s something to be thankful for! 4. Values-Based Mission In October we took a stand on guns, and it was truly meaningful for us. We decided to limit the coverage on guns, and announced we would work to exclude coverage for assault weapons, and condition coverage on owners storing and using their firearm responsibly. Before publishing the post, Shai and I discussed the topic at length, and solicited feedback from our team and investors (a group with diverse political affiliations and views on gun rights). No one knew whether taking a stand would be a smart business move - but everyone thought it was the right thing to do. So we did it. Lemonade is a B-Corp, and trying to do the ‘right thing’ is an important part of our culture. We sincerely believe insurance can regain its stature as a force for social good. We also believe in being bold and transparent - even at the risk of backlash.

To our thinking, we don’t deserve to be a standout company if we’re not willing to stand out.

More than 85,000 people have read the post so far, and my LinkedIn page and Lemonade’s Facebook page became lightning rods for some of the more extreme comments: Many surmised I don’t know the first thing about guns (for better, or worse, I do). Others decided I’m a communist, or a pacifist, or a jerk, or that I don’t understand the need for US citizens to protect themselves by force from their tyrannical government (I’ll cop to that one). But for every one negative comment, the post received 5 likes; and many, many members of our community took a stand with us. Here are some emails we received: Interestingly, Facebook and LinkedIn comments skewed negative, while Twitter and replies to our email were overwhelmingly positive. Reddit attracted the most dynamic debate, and was our biggest source of traffic that day. An intriguing metric from the first 24 hours after posting: there was an almost 8% increase in male traffic, but a 4% drop in purchases by men, while the numbers for women were the mirror image of that: And the business impact? We had 20 customers cancel their policy in protest (less than 0.05%), and we didn’t see a slow in sales. We’re really thankful for that! Which brings me to #5... 5. Our Lemonade Community In November, we launched in Nevada, bringing the number of states we’re live in to seven (we’re now licensed in 22, so more coming soon!). In fact, we’ve sold 70,000 policies so far this year. A quarter of them in the past 30 days alone: But this isn’t just a numbers game: our members are an incredible bunch of people. They’re young (75% under 35), new to insurance (90%), and trustworthy. We went out to meet some of them, and came back convinced that we’re attracting the next generation of amazing customers. See for yourself: People feel and express gratitude in multiple ways, looking at the past, present, and future. Looking back at the past few months, we’re thankful to the tens of thousands who comprise our community. You’re the most supportive customers we could ask for, the best brand ambassadors, and the people who make it all worthwhile. We’re thankful for the present: our team, hustling to release new features, pay claims, and provide our members with the stellar customer experience. See also: Lemonade: Interview With CEO   And we look to the future with gratitude: we love technology, we love social impact, and we love what we do. We’re thankful for all these. Thank you, Lemonaders, and Happy Thanksgiving!

Agency consultant Chris Burand wrote an interesting article published in Insurance Journal. The article discusses the declining role of the agent as an underwriter and the increasing use of data analytics and predictive modeling. It also cites a recent J.D. Powers survey that identifies a correlation between advertising by direct sales carriers and growth and profitability. For example: “Another nail was driven into the coffin of agency upfront underwriting with a J.D. Powers study reported in the June 19, 2017 Insurance Journal. The study, specific to private passenger auto (PPA), shows a strong correlation between advertising and underwriting profitability. Several companies that spend the most on advertising, and do not have agents, have the best underwriting profits. Furthermore, they have some of the highest growth rates. If then, underwriting profit is high, and growth is higher, with more advertising and less agents, at least in PPA, why should companies focus on agents?” I remember seeing this study and questioning two things. First, “correlation” is not cause and effect. Second, are there possible reasons for this alleged superior performance other than advertising and the use of direct, rather than agent-driven, sales? See also: Why More Don’t Go Direct-to-Consumer   I suspect there was a “correlation” (vs. cause-and-effect) between advertising and direct sales (vs. agents) because that’s all J.D. Powers really considered. I’m pretty sure there are other correlations that can be identified, correlations that quite possibly have far more cause and effect. Advertising no doubt measurably impacts growth, but does direct sales vs. agent sales really improve profitability or is something else at work? The most notable alternative correlation could be that carriers who heavily advertise and sell direct sell an inferior product and/or “more stringently” adjust claims. Given that the loss side of the combined ratio is the larger component of premium and profitability, that’s where the biggest payoff comes from. Perhaps J.D. Powers didn’t consider this in their “study” because the authors know nothing about the substantial differences among carriers in product quality and claims practices. As a coverage wonk, for years I’ve seen increasing numbers of coverage-deficient policies being allowed by regulators into the marketplace and I have literally thousands of anecdotal examples of coverage denials on clearly covered claims. Sometimes I can just about predict the carrier(s) involved in such denials. Whether you’re using direct sales, phone apps, data analytics or whatever to reduce costs, at some point you are probably going to be operating as efficiently and predictively as possible. If you sell on price, as these direct sales carriers almost always do, what do you do then? The only way (and probably most effective way) to continue that downward pricing spiral is to reduce how much you pay on claims. You do that by reducing coverage and/or “tightening up” adjusting. See also: Where Can You Find Growth (Part 2)?   Developing and selling inferior products and adopting more stringent claims practices is potentially a far more cost-effective way of increasing profits than using agents or investing billions in sophisticated predictive models, especially if your sales strategy consists largely of using technology to churn customers by the tens of thousands. As long as regulators allow the sale and service of shoddy merchandise, this is likely to be an increasingly popular path to growth and profitability for some carriers. As legendary salesman Morty Seinfeld said, “Cheap fabric and dim lighting…that’s how you move merchandise.”

We are awash in data, and as modern life becomes increasingly connected it is going to quickly turn into an avalanche. Analysis of driving behavior is already challenging the fundamentals of insurance pricing, and that is just the tip of the proverbial iceberg. The questions that the industry needs to answer today are both simple and complicated:

• How do we take full advantage of all the data and related insights?
• Why haven’t we reached the scale in market that has been predicted?
• What have been the challenges?

See also: Cybersecurity Holes in Connected Cars   In my view, there are five fundamental steps that need to be studied and addressed for an organization to take full advantage of the myriad opportunities that have been created by this era of connectivity.

1. Capture and store individual driving data: Of course, it all starts with the capture of data -- that's fundamental. While data makes up less than 20% of the entire effort, if you begin with high-quality components, the opportunity for success is limitless. Well-sourced data provides a foundation to better understand your customers and how you can help. Using that level of meaningful data, you can better price your products, deepen engagement with consumers and improve both your economics and your customers’ overall satisfaction with the claims process. In today’s ecosystem, there is both high-quality, granular data as well as the ability to tap into the many data sources that exist.
2. Predict individual driver risk and future losses: We are in the business of insurance. We are responsible for both understanding and predicting the behaviors that cause accidents as well as the expected costs of loss that are incurred. This is no small task. It requires models that leverage telematics data and loss data. This kind of meaningful data must be sourced from the same time period, so our models can identify the driving behaviors that are causing those accidents, as well as the costs of each incident.
3. Streamline rating and program operations: Your rating and program operations need to be refined, streamlined and optimized for a different environment -- this is a new era. You must know when and why there are issues with your customers and address them appropriately and quickly. These programs must be properly managed. You need to clearly and consistently communicate with your agents, stakeholders and partners, as well as your consumers, especially as your program grows.
4. Optimize driver safety and improve driving experiences: The feedback from long-term, trusted partners as well as from your customers can offer early indications that provide the guidance needed to create or expand a successful new service. To make each driver safer, while improving the driving experience, you must learn and respond to what the consumer data is telling you, specifically the trends of value that provide real insight. Dig in and leverage consumer research, listen to the customer -- specifically what they like and don’t like – and, above all, pay attention to the user interface. Whether that’s the expansion of a new offering or deep-sixing a new product capability, you need to be willing to change and adapt your vision to the qualitative and quantitative feedback.
5. Uncover deeper insights: This isn’t just about pricing; as an industry we are barely scratching the surface of this massive opportunity. It’s important to look for opportunities that will move this effort beyond pricing. Analyze the data itself, as well as the feedback from your customers, to anticipate what the customer is going to want in the future and how the data can optimize your business. Use the data to transform your claims process, provide incentives for better driver behavior and identify fraud before it happens. This kind of approach will lead to more of your customers appreciating and valuing your brand approach.

See also: Why Connected Cars Are So Vulnerable   We have spent a tremendous amount of time and resources trying to anticipate exactly how much this industry will really be disrupted. We can no longer rely on our old-school approaches or the reliable case studies we were taught in business school. I urge everyone to not just consider how this industry might change at the macro level. This isn’t black and white – this requires a nuanced quantitative and qualitative approach. I believe that almost all our processes will be disrupted, fueled by greater connectivity and changes in consumer mobility. It is time to get to work.

Most insurance agencies are relatively new to online marketing. In the past, they competed with the agent down the street, so competition was simple and straightforward. Thanks to the internet, competition has expanded to any company and carrier licensed to sell in a jurisdiction. Many insurance agents are trying to compete online only to become frustrated because it doesn’t seem to be working. Here are eight mistakes agents make with their online marketing campaigns. 1. They Put the Focus on Themselves Today’s consumer doesn’t want to be sold to; they want information. If your marketing consists solely of trying to prove how great you are or how your rates are the lowest, you’ll find that nobody’s paying attention. Instead, focus on your customers by providing information they want to know. 2. They Fail to Answer Questions One way to bring positive attention to your company is by answering questions people ask when shopping for insurance. If the content you provide doesn’t solve a problem or answer a question, it doesn’t have relevance to consumers. Consequently, they will search for another company that meets this need. See also: How to Make Sense of Marketing Tech   3. Poor Call to Action While you don’t want to sell to your customers at every turn online, you do need to end your content with a call to action. It needs to be specific and strong. Instead of just saying “Call us,” say, “Learn how to save money on your car insurance.” Let them know why they should contact you and what they’ll get out of it. 4. Not Validating Leads Sure, you can have a lot of people click on a link, but how many of them follow up with a call or email? How many of the people who take the next step become customers? If you don’t know the number of leads generated from a campaign, you don’t know the value of that campaign. By successfully monitoring your leads (through web metric tools), you can tell which campaigns are yielding the best results. 5. No Website A common trend for many small insurance agents today is to use Facebook to create an online presence instead of putting in the work to have a website. While social media has a big impact and is essential for insurance agencies, they also need a website. If people want to do more research on your company, they need a place to go. 6. They Don’t Keep Up with the Competition It’s not enough to have an online presence for your insurance agency. You must also know what your competitors are doing. Look at their website and check out their Facebook or Twitter pages. See what they’re posting, and figure out how you can be better than them. Only when you compare yourself with the competition will you know how well you’re doing. 7. They Don’t Position Themselves as Unique Insurance agencies are typically competing against several other agents and carriers locally. You must find a way to make your company unique. Otherwise, why would a customer choose you? While offering low rates is one obvious way to compete, not everyone is going to have the lowest rates. Instead, you may need to find some other way to appeal to your audience. It may be as the small-town agent or the one who treats you like family. You may be the company that makes filing claims quick and easy. Look for a way to stand out from the crowd and then promote it. See also: 6 Ethical Challenges for Marketing   8. They Try to Do the Marketing Themselves You’re an expert at insurance. However, you’re not such an expert at online marketing. Many agents make the mistake of thinking they can handle their online marketing when they don’t have the time to do it right. Some agents may post on Facebook every day for a week and then get busy and not post for the next month. If you hire a marketing company, it can set up regular activity to keep you active online when you’re at your busiest. It also knows the most effective methods of marketing to help you get a better ROI. If your core competency is selling insurance; every moment you spend not selling insurance is lost revenue and opportunities. Avoid these eight mistakes in online marketing, and you’ll see your insurance company grow with new customers and a stronger online presence.

Welcome to the first post in our new insurance/insurtech content series! Here, we examine the top internal and external challenges facing the insurance industry, as revealed by our Trend Map, for which we gathered more than 1,000 survey responses from insurance players around the world and consulted more than 50 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. It's a tough time for the insurance industry right now, with a complex raft of issues to deal with over the coming years, from regulatory and climatic change through to adverse market factors, legacy systems and the rise of insurtech. Indeed, one of the problems we had surveying the industry was the sheer variety of potential challenges that respondents might name. For this reason, we drew up a short list based on our periodic research within the insurance community. And, as not all challenges are directly comparable, we split them out into external and internal challenges, creating two separate hierarchies:

1. External challenges: issues in the wider world that necessitate a response from the industry if the industry is to survive and thrive
2. Internal challenges: whatever stands in the way of that response’s successful implementation

For example, increased regulation might require changes from insurers and other industry participants (external challenge); however, lack of company-wide dedication to core priorities might prevent these necessary changes from actually happening (internal challenge). We then asked all our survey respondents – encompassing carriers, intermediaries, solution providers, associations and regulatory bodies – to rank these external and internal challenges in order of importance, giving us an idea of what the industry regards as the biggest hurdles ahead. External Challenges Our external challenges table points to technological advancement as by far the greatest external challenge, followed by changing customer expectations and digital channel capabilities. A quick note on our methodology: Respondents were asked to rank their top three challenges, with three points being awarded for 1st place, two points for 2nd and one point for 3rd. This allowed us to create not just a ranking but a cumulative score for each challenge. New emerging risks, changing economic conditions, increased regulation and increased competition make up the middle tier. Further down we have new entrants to the market, catastrophe risk, absence of a clear strategy and climate change. Then, comfortably in last position, we find lack of company investment.

"Technology has always been a key enabler within the insurance sector. In today’s highly customer-centric world, organizations that want to thrive will do so through digital excellence; meaning by combining unique customer experiences and omni-channel distribution mechanisms, as well as by reinventing interactions across the insurance value chain, despite legacy constraints." -- Sabine VanderLinden, managing director at Startupbootcamp

So what then is the picture, if any, that we see emerging? The top three challenges, notably, form a clear constellation: Changing consumer behavior patterns, especially the desire for digital channels, certainly underlie insurers’ preoccupation with technological advancement to a considerable extent. See also: Prospects for Insurers as a Global Industry   We would therefore say tentatively that the interface between customer and insurer is going to be one of the key battlegrounds going forward, not just in the trivial sense of online portals and chatbots but rather as the ability of insurers and other industry participants to make every part of their operation work for the customer. The mid-tier challenges – essentially market factors – are certainly significant but represent the pointy end of "business as usual" rather than the digital, customer-centric paradigm shift we see coming into focus at the top of the challenges table. This shift falls broadly under the remit of digital transformation, which we have seen at work in many recent initiatives at major insurers, both internal and external to their organizations. Many insurers have, for instance, like Allianz in November 2015, founded some form of digital transformation unit. Likewise, a number of major players have set up venture-capital arms to foster digital innovation outside of their four walls – like AXA Strategic Ventures. While insurance was for a time considered the sleepy corner of financial services in terms of digitization, tech and innovation, we now see a host of transformation and innovation projects underway, and the money is flowing. This is borne out by the fact that lack of company investment was, by some way, the lowest-ranked challenge in the industry. Insurers and other industry participants may or may not be successful in their digital transformation – but this will likely be decided by factors other than their willingness to invest in it. Download your complimentary copy of the full Trend Map here. Internal Challenges The results for internal challenges show lack of innovation capabilities and legacy systems neck and neck and leading the pack. Finding and hiring talent and siloed operations make up the middle tier, with lack of company-wide dedication to core priorities and mergers and acquisitions activity a long way behind at the bottom of the table. The methodology used here was the same as that used in gathering the external challenges – giving us both a ranking and a score. These results are consistent with the picture we saw emerging with the external challenges; that lack of innovation capabilities should be the leading internal challenge indicates first and foremost the industry’s strong will to innovate, which is part and parcel of many insurers’ and other industry participants’ current digital transformation projects. In keeping with this is the low position attained by lack of company-wide dedication to core priorities – it’s clear that what is missing is neither the intention nor the investment to change (lack of investment was rated the industry’s lowest external challenge), rather it is the capabilities to make it happen. And these capabilities fall short in three perennial areas that turn up once again in our internal challenges table: systems, staffing and silos.

"These challenge tables perfectly illustrate and explain the fundamental conundrum of the global insurance industry; the acceleration of technological advances coupled with expanding sense of consumer entitlement and their rapidly evolving tech-driven behavior is causing older and slower-to-change insurers to struggle mightily in playing catch-up and has made them vulnerable to newcomers and disruptors." -- Stephen Applebaum, managing partner at Insurance Solutions Group

Find out more about how these internal and external challenges vary by geography – for Europe, North America, Asia-Pacific and LatAm – in our regional profiles, by downloading the full Trend Map here. Additional Challenges Our survey respondents had the opportunity to provide any additional challenges they felt we had missed. Responses were colorful and varied, but some that stood out were:

• Prevailing low interest rates
• Insurtech/disruptors
• Cyber-risk
• Loss of agents/disintermediation
• Change management
• Lack of strong leadership

Conspicuous on this list is insurtech; while this was not explicit in our short list of challenges above, it nonetheless cuts across them (in particular, technological advancement and lack of innovation capabilities, our two leading external and internal challenges respectively). There is indeed plenty of talk on the air about an impending shake-up of traditional insurance models...

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