"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.

The devastation of Hurricanes Harvey, Irma and Maria is a stark reminder for individuals and organizations about the importance of emergency preparedness. But while most of us think of emergency preparedness in terms of natural disasters, the fact is that organizations today face a multitude of man-made threats, including mass casualty and active shooter/active killer scenarios. While it is important to be ready to face these new threats, the preparation is very different. An Emergency Operations Plan (EOP) is the foundation upon which all incident and emergency management components are built. It is the foremost part of the preparedness phase of the emergency management cycle. Whether hazard assessment, specialized training, exercises or other incident-specific elements, all are based upon a realistic and practical EOP, which is as much about the process as it is about the EOP itself. See also: Hurricane Harvey: A Moment of Truth   The new face of emergency preparedness for many organizations today includes worldwide threats related to terrorism and other acts of violence. Training as a critical aspect of emergency response, continuity of operations and recovery capabilities following a disaster/mass-casualty event are imperative for both public entities and private companies alike. At a minimum, this training should include:

• Active Shooter/Active Killer — preparedness/response including facility design/layout considerations and post-event management/reunification/recovery
• Threat Awareness — situational/operational security training
• De-escalation Training — non-violent verbal intervention
• TaPS Assessment (threat and physical security)
• Theft/Vandalism Assessment

The key to making this training effective is to personalize it to meet the needs of the individual organization. The unique aspects of various entities and organizations must be considered in terms of content and adapted to the entity’s geographic and demographic makeup. To accomplish this, active shooter/active killer training should take place in the actual work environment, allowing site-specific questions and issues to be addressed. Training small groups in their work environment also provides greater participant confidence and organizational readiness. Whether they work for a public entity or a private company, people want to feel confident they will be prepared to address any emergency or threat. They are not interested in high-level, generic information. They want detailed, tangible information and hands-on training for their own workplace. A personalized and comprehensive emergency preparedness program is a vital component of any organization’s overall risk management solution. In response to this demand, Keenan recently launched IMReady (Incident Management Ready), a new suite of security and emergency preparedness resources designed to prepare any entity or organization for a disaster or mass casualty event occurring at its facility, including active shooter/active killer scenarios. See also: Test Your Emergency, Continuity, and Disaster Recovery Plans Regularly, Part 2   What would you do if an unthinkable event began to unfold around you? The more people who are prepared with a clear answer to this question, the more they are able to provide a greater level of security for both themselves and the public they serve.

Many insurance carriers love insurtech because it can help them become more operationally excellent. A growing number realize that this is not sufficient and that they should deploy insurtech to reinvent the way they engage with customers, as well. Leveraging what insurtech enables and combining even more operational excellence with a next level of consumer engagement is not a gradual development; it requires insurance carriers to develop new talents. Leveraging insurtech is basically a new competence to most organizations. Furthermore, it is not easy. It transcends channels, products and departments. It is about working methods but also about changing decades of routines, beliefs and company culture. And last but not least, to know how to deliver it is the real challenge. To quote Morpheus, the character in “The Matrix,” “There's a difference between knowing the path and walking the path.” Here, we will distinguish 10 talents that are more important than ever to leverage insurtech for new ways of customer engagement. 1. Hang out with your customers A different level of customer obsession is required. Because new technologies redefine behavior, we need to know a lot more. All sorts of connected devices offer insurance carriers unprecedented entry in the lives of customers and all sorts of possibilities to help them on all kinds of occasions. To capture this opportunity, insurers have to have much better knowledge of the wishes, expectations and behavior of consumers regarding financial services. Insurers have to understand even better what requirements new customer engagement strategies have to meet. Which ways are best to maintain a dialogue with the customers, increase the contact frequency, be of value all the time, develop pull platforms and stay interesting over time? Which events or themes cause customers to go looking for content? In what way can banks and insurers best help them with that? What part can banks and insurers play in customers' lives? Which role will be accepted by the customer? Insurers have to know better than they do now what customers expect from them when it comes to the use of data. Insurers need to be aware of how customers weigh privacy against convenience and added value as well as what reciprocity is expected, where the absolute limits are and insurers can familiarize customers with the use of data. This is not about briefing a customer research agency. Insurers need to immerse in the life of customers. Hang out with them and observe them. 2. Develop leading-edge data analytics skills and turn data into winning propositions A key challenge for insurance carriers is building new capabilities to take full advantage of the data they collect from connected devices, pull platforms and smart phones. Unfortunately, the enormous amount of data that insurers preserve makes them think there is a lot of knowledge. But all too often it's just a lot of data used for risk assessment, pricing and targeted marketing. In reality, most insurers have not yet succeeded in translating all that data into new customer propositions with new advantages. All these new data streams only become interesting when new, innovative propositions and revenue streams can be based on them — and by translating the data into actionable insights/new offerings and getting these new products and services to market quickly and efficiently. Most insurers are simply not creative or enterprising enough to get the most from their data; neither for the customer nor the company itself. Insurers need to step up the plate. 3. Build relations where the value proposition is alive and personal Building relationships — with customers, insurtechs and partners that are part of the same ecosystem is a core competence. Developing customer relationships is a something most insurers have outsourced in the last 100 years to brokers and other distribution partners. These talents have to be restored and be translated to digital. Insurers have to think about a few things regarding relationships: With whom do we want a relationship? Who would we pass on? What kind of relationship? How do we develop that relationship? How do we give our best? See also: Core Systems and Insurtech (Part 1)   Insurers have to deal with several new aspects. They have to live up to what consumers have grown accustomed to in the mobile world: perpetual updates and improvement, new functionalities and capabilities. Products and services must now be alive and personal. New products and services should take that into account from the conceptual stage on — and there should be longevity. Any concept should be able to sense how consumer needs are changing over time and be able to adapt seamlessly. There should be a constant stream of upgrades and iterations that anticipate the endless consumer desire for continuous product renewal and innovation that will keep motivating customers over a longer period of time. Apart from relationships with customers, other relationships have to be developed and maintained — with all kinds of parties that play a part in the ecosystem or in the customer's context and with insurtechs that innovate a part of servicing for a insurer, insurtechs that come up with new ideas based on the data and infrastructure of the insurance carrier, etc. Building relationships is a core competence. 4. Keep an open mind and leave room for unsupervised learning New entrants venture to question industry conventions. Established insurance carriers should do that, too. As a colleague Eduard de Wilde (VODW) puts it, “If you want to play the game, you need to change the rules.” It’s all about questioning eroded conventions regarding customer expectations and positioning the business model, the products and services, the role of the broker and the importance of channels. Don't start out conforming to conventions, look for ways to break them. Keep an open mind. The high rate of the developments demands that we have to deal with uncertainty. You have to let it happen. That is against insurers' nature. This is where we can learn from adjacent and similar industries such as banking. MobilePay, Danske Bank’s mobile payment solution, is now used by almost every Dane. But Mark Wraa-Hansen (Danske Bank) says, “If you listen to the MobilePay success story, you may think we had it all  figured out, but we definitely didn’t. Of course we had made a business case, but it didn’t stick at all. We outperformed on a lot of parameters, but, at first, we did not make any money. However, with MobilePay we created a huge user base and it enabled us to build an ecosystem. And there is a lot of money in that ecosystem. The business case is quite different to when we started. It is actually better looking ahead than what we thought initially. There is just a lot of stuff  that you cannot foresee. It turns out that MobilePay is ‘first reach, then rich’. For a bank, this sounds very risky.” Remember your empathy,  flexibility and improvisational skills. There should also be some open ending — room for unsupervised learning — to use whatever is derived from the data and learning experiences to take the next step and continuously match changing needs. We are shifting from product to constantly evolving services. 5. Be agile and improve the time-to-decisions This is where we need to distinguish agility in adapting to change and an agile way of working within organizations. They are related yet very different. An often-heard reason for digital transformation is that it speeds up the time to market. That's true, of course. Time to market of small banks is six months. Large banks need twice this time. By the way, that is not unique for financial institutions. It takes fast-mover Proctor & Gamble about 300 days to go from a new product idea to a supermarket shelf. But in many large organizations, the time-to-decisions is the main problem. Decision-making takes ages, and it’s losing possible profit opportunities because a possible profit is bigger when you can bring it to market earlier and benefit from it longer. This way, you lose momentum. The longer you wait, the less relevant the idea will become. Agility will become the standard. Who would have thought that Spotify would eventually be more renowned as an organization model than as a music service? 6. When experimentation is perfect, it's too late Fostering opportunities that new technologies offer requires experimentation. We never could have guessed all the things that the internet has made possible, let alone what smart phones have made possible. It's just as hard to foresee what can be done with, for instance, connected devices. Insurers need to use techniques such as the lean methodology to experiment with new ideas and processes and constantly tweak these with fast feedback loops. Of course, that is also a culture issue. The challenge is to get people to be more ambitious. Again, insurers can learn from the banking sector. At DBS Bank, they have changed the word “no” to the phrase “let’s experiment.” But it definitely can be done, even on a massive scale. Part of agile working and experimentation is thinking in terms of minimal viable products and improving these on the go. Mark Wraa-Hansen (Danske Bank) says, “We actually launched MobilePay before it was finished. People told us ‘Don’t launch this until you have solved this or that.’ Of course it made us insecure. But we just didn’t want to lose the first-mover advantage. We’re building a plane while it flies. But when it’s perfect, it’s too late.” 7. Be creative and hire strange animals Collecting and modeling data is one thing; translating it to new concepts, ideas for features in pull platforms, dialogues with customers or added value is quite another. In building advanced data analytics skills, financial institutions suffer from some sort of anemia when it comes to this particular kind of creativity. Put customer experience design in the hands of design experts, not in the hands of workers who have been working in insurance carrier for ages. Hire strange animals who feel comfortable asking the questions nobody else dares to ask, people with completely different backgrounds (from the gaming, e-retail and online gambling industries, for example). 8. Regarding orchestration: Respect all nodes, cooperate and compromise Orchestration is required at different levels to get the most out of agile teams, break down silos and create an ecosystem where every party has added value. Terms such as “ecosystems” and “marketplaces” suggest that these are more or less autonomous. That is not quite the case. Theo Bouts (Allianz) says, “A key function in smart ecosystems is orchestration. And the most important factor for success in orchestration is a genuine belief in the significance of connectivity — and you must be prepared to live by it. There is a shift in roles between insurer, consumer and distribution partner. That means that you have to understand and respect the needs of all nodes in the network and that you keep granting access to nodes that may not be of value to you but are valuable to the ecosystem as a whole. This part of orchestration requires a certain level of maturity and a different mindset. If all is well, parties in an ecosystem are all convinced that value is added for the network and for each of the parties. Because of that, there can be no room for practices such as hard selling techniques. Orchestration requires specific talents: content, people and process skills. When you think of a network, you may conclude that process skills are the most important in establishing an ecosystem and continuing to give it new impulses. I think that the other two — content and people — are much more important. If you want to successfully play the part of an orchestrator, you have to master content 100%. Cooperation and, if necessary, compromise, have to be in your blood. 9. Gather the right people and change your DNA The previous eight talents make clear that leveraging insurtech to the max is perhaps one of the most difficult challenges a company faces, primarily because it often requires the company to change deeply rooted corporate cultures. It's not about drawing up a new organigram but gathering people around you that feel comfortable with. People who are agile, dare to take responsibility, are willing to keep an open mind, have the right skills (for instance, data creativity), can handle a certain level of uncertainty, enjoy developing relationships with other parties and are obsessed with customers. See also: What’s Your Game Plan for Insurtech?   Often, people with these talents are already inside the company — they only have to be found and empowered. But it's not like the traits we just summed up are present in the genes of every financial institution. It has taken quite some time before insurers invested substantial amounts of money in innovation. Peter Maas, professor of insurance management at Sankt Gallen University in Switzerland, argues that this is caused by the DNA of the whole insurance industry. The core of the business model of insurance is to look backward at risk figures. It is not about painting future horizons, customer obsession and building relationships. Innovation and customer engagement is unnatural. 10. Get in the trenches to instill change The people at the top are the most important agents of change. So to really get the most out of what insurtechs have to offer, you must have motivated board members who love customers. Furthermore, you need a vision that sees new engagement strategies, informed by new technologies, as the primary source of differentiation and profit. The IT infrastructure is often an important hindrance in renewing and challenging the existing business. But, in our experience, the management culture may be an even larger barrier. The more management layers, the more bureaucratic processes there are and the more that politics come into play. More agile working calls for resistance, especially by the most powerful part of the organization: the middle management. Everything stands or falls with the C-level having sufficient strength and power to break this — all while getting the remaining management layers to give the vision their unconditional support. To really bring about change, leaders must make time to get into the trenches to instill change. Interested to read more? Check our latest book “Reinventing Customer Engagement: The next level of digital transformation for banks and insurers” (LID Publishing, 2017) here or here. You can find the original article published here.

Winning teams — in sports, business and all areas of life — have deep benches. Even if your company is fully staffed, taking your eye off the ball when it comes to recruiting is a sign of complacency, the kryptonite of success. What if one of your stars decides to take another job? What if one of your top executives experiences an unexpected health crisis or family tragedy and decides to leave the company? Did you know that two-thirds of those reported to be misusing painkillers in the U.S. are currently employed and are thus susceptible to declining performance or medical leave? More than ever before, companies must be ready to replace employees at a moment’s notice. The time it takes for you to fill a vacant position has increased. Glassdoor reports that, since 2009, interview processes have grown from 3.3 to 3.7 days, and data from DHI Hiring Indicators shows that the average job opening remained unfilled for 28.1 days on average in 2016, an increase from 19.3 days in 2001-03. That is why it is critical for companies to build what is called a deep virtual bench. The world’s most innovative human resource leaders are vigilantly focused on recruiting 365 days a year. See also: Is Talent the Best Defense?   Having helped world-class companies recruit B2B sales executives for decades, I can offer four ways to build a strong virtual bench:

1. Aggressively Target Passive Job Seekers: LinkedIn reports that 70% of the worldwide workforce is composed of passive candidates who aren’t pursuing new employment opportunities but may be open to listening. Passive recruiting is important because most high-performers are already gainfully employed. To effectively recruit passive B2B sales job seekers, you must have a great reputation within the industry; have a seamless and optimized application process (companies such as Netflix and Facebook allow you to apply with one click of the mouse); and consider using an outside recruiting company to maintain a safe distance and avoid being accused of poaching.
2. Leverage Cutting-Edge Technology: Since implementing artificial intelligence into their recruiting process, Unilever saw the average time to hire an entry-level candidate reduced from four months to four weeks. Instead of visiting colleges, collecting resumes and arranging interviews, the company made the jobs known via social media and then partnered with an A.I. company to screen the applicants. This took place in 68 counties in 15 languages with 250,000 applicants from July 2016 to June 2017. Recruiters' time spent reviewing applications decreased by 75%. LinkedIn also just recently announced TalentInsights, a new big data analytics product that enables HR leaders to delve more deeply into data for hiring. This helps employers identify which schools are graduating the most data scientists, engineers or history majors; helps analyze your recruitment patterns versus those of your competition; and provides information about growth of skills in certain areas of the country.
3. Become an Employer of Choice: Glassdoor reported that 84% of employees would consider leaving their current jobs if offered another role with a company that had an excellent corporate reputation. Great candidates, millennials especially, value a commitment to employee wellness, sustainability and initiatives that cater to gender and diversity equality. Having a strong culture, values and clear company mission are critical to building a strong talent pipeline. Top companies such as Bain & Co., Google and Facebook offers perks such as free meals, onsite gyms, massages, free laundry services and generous parental leave. Given that Americans currently carry a record $1.4 trillion in student loan debt, student loan repayment assistance has become one of the hottest new benefits being offered by companies such as Fidelity and Aetna. The size of your company will dictate how many perks you can offer, but adoption of policies that are thoughtful toward employees will turn them into your biggest brand ambassadors. In addition to generating that organic positive publicity, submit applications for the “Best Places to Work” lists offered by most publications. These are now offered by most national publications as well as local business journals.
4. Appeal to Diverse Candidates: To build a strong virtual bench, you must widen your search and appeal to candidates from different backgrounds. A PwC study found that 71% of survey respondents who implemented diversity practices reported that the programs were having a positive impact on the companies’ recruiting efforts. The previously mentioned Unilever case study resulted in their most diverse entry level class to date, including more nonwhite applicants and universities represented increasing to 2,600 from 840. To build your virtual bench, consider implementing diversity-friendly policies such as floating holidays. These allow people to take off for Good Friday, Yom Kippur or Ramadan or for a yoga retreat, if that is their preference.

See also: Secret to Finding Top Technology Talent   Building your virtual bench 24 hours a day, seven days a week and 365 days a year will help position your company for success, including increased profitability and improved company reputation.

One of the hottest topics in insurance industry forums, the news and many prognosticators/speakers' commentary is that there could be a threat to the insurance industry because of insurtech — that the insurance industry will be revolutionized and that incumbents should be in defense mode to retain their business. That threat carries some credibility, but there is some issue with many of the forecasts out there. I think the thought process is somewhat flawed, for two reasons:

1. Rarely is anyone putting a time-frame on their predictions. Anyone can predict something with no time-frame and, hence, have no accountability if they are wrong. This is like the fortune teller stating, “You will die in the future.” Although that fortune is accurate, you might feel ripped off if you paid for it.
2. The predictions seem to be coming from a vacuum and don’t include thoughts on game theory. Some predictions rarely account for or think about incumbents; the incumbent insurer advantage and reaction; and how long the insurtech investor can realistically wait for outcomes/results.

Let’s focus on No. 2. Game Theory Game theory is the branch of mathematics concerned with the analysis of strategies for dealing with competitive situations where the outcome of a participant’s choice of action depends critically on the actions of other participants. Game theory has been applied to war, business and biology. But this art/science isn’t discussed when predictions about the industry are presented. A basic thought is, if insurtech is going to threaten incumbent insurers, how do we think the incumbents will react? Incumbent Insurer Options Incumbents have a few options regarding insurtech:

• Imitate — recapture market position once insurtech has revealed that an approach works. Each company can develop new technologies to improve operating efficiencies, source risk quicker, understand exposures better, etc.
• Wait Longer– for the success of an approach to be revealed. If customers don’t react to a new technology or the advantage is not apparent in results, no resources were wasted. If you’ve read Good to Great in insurance or “Good to Great,” the book, think about the flywheel or the Walgreens example. The ability to wait is greater for incumbents in insurances, as insurance markets are not a winner-takes-all.

See also: Complexity Theory Offers Insights (Part 1)   Incumbent Advantage Incumbents have a huge advantage; they have customers, capital, track record for sourcing risk, systems, platforms, regulatory framework aligned, etc. Newcomers have to take riskier strategies to move into the ranks of the incumbents. If incumbent insurers use simple game theory strategies, they have a lot of benefit. A defensive position by incumbent insurers can affect timing, forecasted results, market share, etc., ultimately delaying insurtech investors from seeing the gains or traction they were hoping for or predicted at the time of the investment. This delay could change exit strategies for investors. Venture Capitalist business model Many of the funds coming into the insurtech space are from venture capital firms. An investment from a venture capitalist typically is a form of equity financing — the VC investor supplies funding in exchange for taking an equity position in the company. According to Harvard Business Review, “Venture money is not long-term money. The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a corporation or so that the institutional public-equity markets can step in and provide liquidity. In essence, the venture capitalist buys a stake in an entrepreneur’s idea, nurtures it for a short period of time and then exits with the help of an investment banker.” The investors in VC funds expect a return of between 25% and 35% per year over the lifetime of the investment. This is because of the nature of the risk. For every deal that doesn’t go as planned, VC firms need those with great hockey-stick-returns to meet this expectation from investors. Insurtech investors/Market Cap Other questions would be around the market multiple given to an insurance company versus a technology company. Are those companies that are positioning themselves as the “future of insurance companies” taking a prudent approach in trying to unseat incumbents? Is it better to be a servicing company over a disruption startup? Given the timing and investor strategy, would insurtech companies be better off positioning themselves as technology services companies for the insurance industry versus insurance companies with great technology? At least it’s safer for the investor at the time of sale… If an investor is looking for an exit strategy, would it prefer a multiple of earnings similar to an insurance company or a publicly traded tech company? Capital Into Insurtech Despite the influx of capital into insurtech recently, funding to this sector may be flattening in 2017. (There are a few articles written about this at Insurance thought Leadership and others.) Based on funding patterns, it appears at least $2-3 billion a year is now going into “Series B” and “Series D” funding — meaning into existing companies that have been around for at least a couple of years. Margin Compression Who is better suited for margin compression to be removed from the system? If you look at Uber, transportation services companies were loaded with debt (NYC medallions cost around $1 million) and insulated by a regulatory framework that supported that debt. In addition, the downward pressure on the cost of a ride to the airport was immediate and seen in real time by both the consumer and the seller. So, transportation was ripe for disruption driven by consumer demand With insurance companies, the pressure will take time to shake out. Because the cost of goods sold (or losses) is unknown at the time of sale, the ability to decrease costs is somewhat limited to expense savings. Again, advantage incumbent — at least until you can prove that technology works and has passed savings to the customer through enhanced loss-cost prediction and risk selection. With incumbent insurers sitting on mountains of cash/bond portfolios as insulation to the margin compression, some companies can achieve low single digit ROEs just on their investment portfolio alone, even before underwriting results. So, who is better suited for the decrease in margin? Where should investors be putting their capital for the long term? See also: Einstein’s Theory on Work Comp Outcomes   Thoughts Incumbents are going to react and defend their positions and acquire teams or technology that have proven to help (lower expenses, acquire customers, etc.). VC investors are going to push for exit strategies or sales to incumbent insurers over the next five to six years and will look for new investment opportunities. This article isn't intended to make incumbents feel warm and cozy about the state of the market. There definitely will be some disruptions of certain sectors of the industry. However, if you're looking to compare the disruption of Uber to the insurance industry, I believe it will be an uphill battle to disrupt insurance in a similar fashion. (Thanks, McCann-Ferguson). But anything is possible. Don’t get complacent and disregard the consumer. The insurance industry is in need of a technology shakeup — and one would benefit the customer, the insurers, the insurance incumbent investors and many of the insurtech founders/VC firms.