There is no mistaking that, by now, most consumers have at least a passing awareness of cyber threats. Two other things also are true: too many people fail to take simple steps to stay safer online; and individuals who become a victim of identity theft, in whatever form, tend to be baffled about what to do about it. A new survey by the nonprofit Identity Theft Resource Center reinforces these notions. ITRC surveyed 317 people who used the organization’s services in 2017 and had experienced identity theft. The study was sponsored by CyberScout, which also sponsors ThirdCertainty. A few highlights:

• Nearly half (48%) of data breach victims were confused about what to do.
• Only 56% took advantage of identity theft protection services offered after a breach.
• Some 61% declined identity theft services because of lack of understanding or confusion.
• Some 32% didn’t know where to turn for help in event of a financial loss because of identify theft.

Keep your guard up These psychological shock waves, no doubt, are coming into play yet again for 143 million consumers who lost sensitive information in the Equifax breach. The ITRC findings suggest that many Equifax victims are likely to be frightened, confused and frustrated — to the point of acquiescence. That’s because the digital lives we lead come with risks no one foresaw at the start of this century. And the reality is that consumers need to be constantly vigilant about their digital life. However, cyber attacks have become so ubiquitous that they’ve become white noise for many people. See also: Quest for Reliable Cyber Security   The ITRC study is the second major report showing this to be true. Last fall, a majority of computer users polled by the National Institute of Standards and Technology said they experienced “security fatigue” that often correlates to risky computing behavior they engage in at work and in their personal lives. The NIST report defines “security fatigue” as a weariness or reluctance to deal with computer security. As one of the study’s research subjects said about computer security, “I don’t pay any attention to those things anymore. … People get weary from being bombarded by ‘watch out for this or watch out for that.’”

Cognitive psychologist, Brian Stanton, who co-wrote the NIST study, observed that “security fatigue … has implications in the workplace and in peoples’ everyday life. It is critical because so many people bank online, and since health care and other valuable information is being moved to the internet.” Make no mistake, identity theft is a huge and growing problem. Some 41 million Americans have already had their identity stolen — and 50 million reported being aware of someone else who was victimized, according to a Bankrate.com survey. Attacks are multiplying With sensitive personal data for the clear majority of Americans circulating in the cyber underground, it should come as no surprise that identity fraud is on a rising curve. Between January 2016 and June 2016, identity theft accounted for 64% of all data breaches, according to Breach Level Index. One reason for the rise was a huge jump in internet fraud. Card not present (CNP) fraud leaped by 40% in 2016, while point of sale (POS) fraud remained unchanged. It’s not just weak passwords and individual errors that are fueling the rise in online fraud. Organizations we all trust with our personal information are being attacked every single day. The massive breach of financial and personal history data for 143 million people from credit bureau Equifax is just the latest example. Over the past four years, there have been a steady drumbeat of major data breaches: Target, Home Depot, Kmart, Staples, Sony, Yahoo, Anthem, the U.S. Office of Personnel Management and the Republican National Committee, just to name a few. The hundreds of millions of records stolen never perish; they will continue in circulation in the cyber underground, available for sale and/or to be used in the next innovative fraud campaign. Be safe, not sorry Protecting yourself online doesn’t have to be difficult or complicated. Here are seven ways to better protect your privacy and your identity today:

• Freeze your credit rating at the big three rating agencies so scammers can’t use your identity to take out loans or credit cards
• Add a website grader to your browser to avoid malware
• Enroll in ID theft coverage with your bank, insurer or employer —it could be free or surprisingly inexpensive
• Get and use a password vault so you can create and use hard-to-guess passwords
• Be knowledgeable about common cyber scams
• Add a verbal password to your bank account login and set up text alerts to unusual activity
• Come up with a consistent way to decide whether it’s safe to click on something.

There is a bigger implication of losing sensitive information as an individual: it almost certainly will have a negative ripple effect on your family, friends and colleagues. There is a burden on consumers to be more active about cybersecurity, just as there is a burden on companies to make it easier for individuals to do so. See also: Cybersecurity: Firms Are Just Sloppy   NIST researcher Stanton describes it this way: “If people can’t use security, they are not going to, and then we and our nation won’t be secure.” Melanie Grano contributed to this story.

Insurers are full of economy-speak these days. We have the gig economy, the digital economy, the data economy and the sharing economy. There is the economy of one, the economy of the many, the service economy and, of course, the experience economy. These concepts are all real and vital considerations for insurers, yet most deal with the implications of external impact, asking, “How will the world affect our business?” In one striking case, however, we are faced with an alternative question: How will our operations affect our world? We are in the midst of the digital age race where survival and winning will require rapid adaptability and innovation. The digital age represents a seismic shift in the insurance industry, pushing a sometimes slow-to-adapt industry by challenging the traditional business models and assumptions of the past 30-50 years. The business models of the past will not meet the needs or expectations of the future for digital insurance. So insurers will be drawing upon the strengths of a new type of economy that will provide internal energy to the organization and competitive drive to the industry. This economy is the platform economy. Cloud platforms are the future because they are the core of revolutionized business models. They are proven. They are intelligent. They combine sought-after technologies. Best of all, they fit an industry that has been trying to become consumer-centric. Of course, there is an issue. The cloud-based, digital-ready platforms within the platform economy are easiest to plant in uncultivated environments. Most established insurers are in the thick of modernization of a different type and scale. When faced with the options, many will choose digital answers that are painted over modernized frameworks. At the same time, they will be flirting with the idea that a real platform shift may represent a hyper-jump into insurance’s agile future. The Rise of the Platform Economy In our new thought leadership, Cloud Business Platform: The Path to Digital Insurance 2.0, we note that the use of big data, artificial intelligence and cloud computing is changing the nature of work and the structure of the economy. Companies such as Apple, Amazon, Netflix, Facebook, Google, Salesforce and Uber are creating online structures that enable a wide range of activities. They have opened the doors to radical changes in how we work, socialize, create value in the economy and compete for profits. This is why a digital platform economy is emerging. See also: Busting Myths on the Cloud (Part 2)   Cloud business platforms represent a new era of impact and industry upheaval. A cloud business platform is one that can run key business applications and services to match the reality and requirements of the current business environment. That environment is characterized by constant disruption, heavy competition and growing market demands. Insurtech entrants are embarking upon business and technology initiatives that exploit untapped markets and address under- or un-met needs. Incumbents with outdated technologies are at a huge disadvantage because they are unable to respond with the flexibility, agility and speed that has become the hallmark of companies that are digital natives. With investments in this market subset being tracked at just under $16 billion since 2010, insurers need to immediately take notice. Successful companies across all industries leverage technologies such as mobile, social and cloud to make better decisions, automate processes, strengthen their connection with customers/partners/channels and pursue innovation. They do all of this at an increasingly rapid pace, positioning them as “digital first” companies. The acceleration in the uptake of digital technologies and cloud foundations is a crucial first step to entering into the platform world and the shift to a new era of insurance we call Digital Insurance 2.0. The implication from all this is that the digital age economy is powered by the platform revolution. Digital Insurance 2.0 Traditional insurers must have digital daydreams now and then. What if we could have started like Amazon instead of like a traditional insurer? What if we had a digital native architecture like Netflix? Why couldn’t we have turned an app into a multi-billion-dollar business as Uber did? Google was disruptive because its framework and model were created to meet the future head on. How do we do what they have done while we are shackled to the constraints of insurance? The advantages these companies enjoy compared to the challenges faced by insurers can make digitalization of insurance seem like an impossible task. The reality is, however, that insurers now have every opportunity for freedom within traditional insurer constraints utilizing a Digital Insurance 2.0 framework. What are the attributes of Digital Insurance 2.0? In every aspect, digital platforms are driving toward business models with fewer barriers and greater data access with improved flow. Digital insurance  platforms share these traits:

• Maximized effectiveness across the entire customer journey with deeper, personalized engagement;
• Process digitization that improves operational efficiencies and customer experience;
• The ingestion and use of digital data-driven insights for better decision-making and to actively identify customer needs;
• The ability to rapidly roll out new products and capabilities while expanding into new markets or geographies; and
• Quick adaptation to rapid changes.

The crucial technology underpinning digital insurance platforms is cloud-based. The idea that a 10-year old technology like cloud computing could provide new opportunities for insurers seems far-fetched. Cloud platforms, however, have become the option of choice for Greenfield or startup operations that are offering digitally-enabled traditional insurance products — like Lemonade, Slice and TROV. Cloud platforms are the basis of a new generation of core systems based on a micro-services architecture that is needed for innovative new insurance products like on-demand and micro-insurance offerings. Shifting from Products to Platforms Since the beginning of automation, the insurance industry has seen fundamental design, architecture and technology shifts in insurance core software solutions. First, we had the monolithic solutions running on the mainframe from the 1960s to early 2000s. This was followed with the best of breed components in early 2000s for policy, billing and claims based on J2EE and service-oriented architecture — but with each still using different business, data and technology architectures. Next, beginning in the early 2010s, came the loosely coupled “suites,” inclusive of the policy, billing and claims components but with a consistent and common business, data and technology architecture. Yet, through these transitions, they maintained a product-focused business architecture view, emphasizing policy and billing and claims capabilities and with implementation primarily on-premise or in a private hosted environment, often a “pseudo cloud environment.” Today’s digital shift will require cloud-based platforms that provide a great promise to address new challenges and opportunities that enable insurers to disrupt their markets before they are disrupted. This requires a new thinking of our solutions… one that makes the transition from products to platforms and is underpinned by three key attributes: ecosystem-friendly, centered on customer experience and enabled by cloud computing. Unfortunately, too many insurers are taking a page from their old business transformation playbooks and are expecting it to work in today’s digital age. They are forging a new path by “paving the old cow paths,” which is simply creating greater complexity while moving in a direction that will not serve them well in the future. Instead, insurers need to look outside their companies to a new cadre of digital leaders and imagine the art of the possible. What can insurers do now that they could not do before because of technology, customer and market boundary changes?  Today’s emerging new competitors are answering these questions ahead of traditional insurers, positioning themselves as the new generation of market leaders in a time of significant disruption and change. See also: ‘Core in the Cloud’ Reaches Tipping Point   Fundamentally, to succeed in the digital age, an insurer’s strategy must focus on the following attributes:

• Customer experience and engagement is priority No. 1 (People)
• Business innovation is mandatory (Technology)
• Ecosystems extend value (Market Boundaries)
• Speed-to-value is the differentiator

For an effective digital transformation, it is important that core, data and digital capabilities are broken out into micro-services. They are then integrated back into the platform to provide a digital experience. Innovative, “digital-first” companies like Google, Amazon, Salesforce, Workday, Uber, Airbnb and Netflix have successfully used this architecture and technology that is disrupting industries. In the case of insurance, digital experiences are enabled by cloud economies of scale — an advantage that many digital-first companies do not have. Why is this important? Because it will allow insurance companies to more rapidly position themselves in the digital era of Insurance 2.0 and enable them to:

• Accelerate digital transformation to become digital era market leaders;
• Accelerate innovation with new business models and products;
• Accelerate ecosystem opportunities and value; and
• Avert disruption or extinction by new competition within and outside the industry.

At the heart of this disruption is a shift from Insurance 1.0 to Digital Insurance 2.0 and a growing gap where innovative insurtech or existing insurers are taking advantage of a new generation of buyers with new needs and expectations and are capturing the opportunity to be the next market leaders in the digital age. The path to a cloud business platform will evolve differently for each insurer undertaking it. Being open to operationalize around the cloud platform’s promise as a new business model paradigm acknowledges the role innovation will continue to play as insurers encounter future insurance ecosystems. The time for plans, preparation and execution is now — recognizing that the gap is widening and the timeframe to respond is closing. Will established insurers suffer at the hands of tech-savvy, culture-savvy competition, or will they turn their digital daydreams into dynamic realities? In a rapidly changing insurance market, new competitors do not play by the traditional rules. Insurers need to be a part of rewriting the rules, because there is less risk when you write the new rules.

This is the sixth in a series. The other parts can be found here. The Insurer of the Future's customer won't have to buy individual products. Instead, she'll buy a total risk management solution that flexes to her needs month-by-month, day-by-day and hour-by-hour. She'll be billed according to her actual usage, so she'll never be under- or over-insured. When the Insurer of the Future's customer leaves her house, the accidental damage element of her home cover will decrease — because she's no longer there to damage anything. But her flood and fire cover will go up, as she's less likely to spot such events early. If she buys a TV, her insurer will know that and will add it to her policy. The insurer will also ask what's happening to the old one and will remove it if no longer relevant. If the customer goes hiking in the wilderness, the Insurer of the Future will pick that up and increase her life cover. If her hiking is abroad, travel covers will kick in automatically. And once the customer is back home safely, her cover, and her premium, will go back down. See also: A New Way to Develop Products   Once the Insurer of the Future has earned its customer's trust, she might choose to open up her current and future search history and social media accounts to its systems. That way, the Insurer of the Future can monitor what she's thinking about doing (bungee jumping, getting married, having a baby?) and step in with timely advice and support. Some of the Insurer of the Future's older employees remember when “customer lifetime events” were the elusive holy grail. Not any more — now, the insurer knows about all of these events, often before they even happen.

Progress!

In recent weeks, I've seen a series of announcements of reductions in worker's comp premiums because of improved safety in the workplace. For instance, Colorado approved a 13% reduction in the loss costs portion of workers' comp rates for 2018; there was a nearly 30% decline in the rate of claims in the state between 2001 and 2015. 

While reductions certainly aren't happening across the board, and while safety isn't improving so noticeably everywhere, the fact that safety is leading to some rate cuts lets me hope that the industry is making progress on a theme that we've been sounding for some time now. That theme is the need to get away from a product mentality, where "factories" are churning out policies, and to a service mentality, where the focus is on using our hard-earned experience and access to volumes of data to help customers minimize risks in the first place. 

The workers' comp reductions will need to just be the start, of course. There are still all sorts of costs that can be driven out of the insurance process as digitization spreads, driven by the insurtech movement. As a senior brokerage executive says in this article, "Some 42% of premium is taken up with costs, according to the London model, and 30% of that is us.... We have to address that cost." And that's just on the brokerage side of the equation.

But I'll take progress where I can find it. Let's all congratulate ourselves—then get back to work. 

Cheers,

Paul Carroll,
Editor in Chief 

“The smart money bets against tax reform — always and everywhere. But every once in a while — usually a long while — the smart money is wrong.” –Joseph Thorndike, noted tax scholar. On Nov. 2, the House Ways and Means Committee released the “Tax Cuts and Jobs Act,” a major overhaul of the U.S. tax system. The proposal is a significant step forward in a years-long effort to reform our nation’s outdated tax code. While the House legislation is only the beginning of the proverbial “sausage-making” process, it is important to understand the bill’s effect on the insurance industry, because (1) the effect is significant; and (2) the chances of tax reform actually happening are as high as they’ve been in many years. Summary Tax reform is always an exercise in trade-offs, and this time is no different. At a high level, the House proposal would lower the maximum corporate tax rate to 20% and move the U.S. to a territorial tax system. Pass-through entities such as partnerships would be subject to a maximum tax rate of 25%. While the most significant provisions in the bill apply to businesses, the proposal also consolidates the seven tax brackets for individuals down to four, maintains the highest individual rate of 39.6%, doubles the standard deduction and curtails popular individual deductions such as the state and local tax deduction and the mortgage interest deduction. As with every previous tax reform proposal, the House legislation creates, or is perceived to create, winners and losers. At the highest level, the legislation poses a trade-off between lower corporate tax rates and a more globally competitive tax regime for U.S. businesses and the elimination or reduction of popular tax breaks on both the individual and the corporate side. The House bill costs $1.5 trillion in foregone revenue over 10 years. This is likely the outer limit of the deficit spending to fund tax reform. In other words, the need to identify “pay-for” provisions that increase taxes on one group to pay for cuts in another area will only grow as the bill moves through the legislative process. As detailed below, the tax bill raises almost $40 billion in revenue from the insurance industry via changes to its corporate tax treatment. This basic approach is not likely to change significantly during the legislation process. Insurance CEOs considering whether to support this effort will ultimately need to answer the question of whether a 20% corporate rate and territorial tax system is worth the trade-off in terms of changes to key insurance corporate tax provisions. Life Insurance The current tax treatment of insurance companies reflects their unique business model and state regulatory regime. Perhaps owing to the complexity of life insurance product and corporate taxation, life insurers have sometimes been subject to a misperception of being too lightly taxed. The current House proposal arguably reflects that perception. On balance, life insurers (and insurers in general) were affected to a larger degree than other sectors through negative changes to their corporate tax treatment. In fact, with the exception of a single provision hitting banks' deductions of their FDIC premiums, insurers were the only segment of the financial services industry specifically singled out via pay-fors to finance the proposal’s tax reductions. To provide a glass-half-full perspective, prior tax reform proposals included negative changes to certain life insurance and retirement products. In a win for the life insurance industry, the current House legislation does not reflect those prior proposals and makes no change to inside buildup, the tax treatment of corporate-owned life insurance or the tax treatment of retirement plans and products. Having said that, the corporate tax changes specifically targeting life insurers raise significant revenue (almost $25 billion in total) and bear close watching. See also: Why Fairness Matters in Federal Reforms   Most notably, the House bill would clip the life insurance reserve deduction by requiring that life insurers take into account a prescribed percentage of the increase or decrease in reserves for future un-accrued claims when calculating taxable income. This provision alone is estimated to increase the taxes life insurers would pay by $14.9 billion over 10 years. In fact, this estimate may dramatically understate the true effect of this provision on the industry. In a provision that raises $7 billion, the bill would change the expensing rules for life insurance policy acquisition costs. The bill would also restrict the timing of when reserve increases or decreases are taken into account and would limit the dividends-received deduction by prescribing a flat 40 % company share. The proposal would change the net operating loss rules to restrict the number of years that life insurers’ losses can be carried back (from three to two) and forward (from 20 to 15). The legislation would also repeal the special tax rules for distributions to shareholders from pre-1984 policyholder surplus accounts. Congressional revenue estimators believe that these life insurance company taxation provisions would raise more than $24 billion in additional tax revenue over 10 years, and, as noted above, the reserve deduction restriction alone would raise $14.9 billion, and the expensing rule change would raise $7 billion. This revenue estimate, while inherently inexact, indicates the magnitude of the effect on the industry. Property and Casualty The draft legislation also targets property and casualty corporate tax. The proposal modifies the discounting rules for P/C companies, reducing the tax value of unpaid losses. It also restricts the reserve deduction by modifying proration rules. The change to discounting rules alone raises $13.2 billion over 10 years, and, in total, the P/C corporate tax changes raise over $15 billion in the budget window. All in all, the corporate tax changes specific to insurers would raise almost $40 billion. It’s clear that insurance has been identified broadly as a source of pay-fors to fund tax reductions in other parts of the overall package. International Provisions Much of the animus behind the tax reform proposal lies in the drive to make the U.S. tax system more globally competitive. While all multinational insurers would be affected by the bill’s international tax provisions, two provisions in particular would specifically affect insurers and reinsurers. First, the bill would impose a 20% excise tax on U.S. domestic corporation payments to foreign affiliates. Importantly, the purchase of reinsurance by U.S. insurers from foreign reinsurance affiliates would be subject to this tax, which is being interpreted as partly a shot across the bow at offshore reinsurers. In addition to the 20% excise tax, the House bill would restrict the insurance business exception to the passive foreign investment company (“PFIC”) rules. The PFIC exception would apply only if the foreign corporation would be taxed as an insurance company were it a U.S. corporation and if certain other company-specific conditions were met. The 20% excise tax provision raises a whopping $154.5 billion over 10 years, and while it’s being discussed a great deal in the reinsurance world, it is not specific to reinsurance transactions and would have significant implications for many non-insurance multinational corporations. The PFIC provision, which obviously is specific to insurance, raises a much more modest $1.1 billion in the budget window. Lastly, multinational insurance companies should watch the “deemed repatriation” provision, which would subject foreign earnings to a one-time U.S. tax. Prognosis As this legislation winds its way through the House and the Senate, we can expect some changes as a result of the inevitable onslaught of lobbying and strong policymaker preferences. However, the basic approach this bill takes to reform is not likely to change. In terms of timing, the House, with its comfortable Republican majority, is likely to pass some version of the current bill this year with fairly modest changes during committee consideration but likely no amendments permitted during the full House vote. In other words, there is a very narrow window (weeks, not months) to change the provisions in the House bill before it gets voted out of committee, passed by the full House and kicked over to the Senate. See also: Outlook for Taxation in Insurance   The prognosis in the Senate is murkier, because even under the expedited 51-vote process Republicans will use pass tax reform, the GOP can only afford to lose two votes. To get there, leadership has to satisfy divergent voices within the party in what is almost a Goldilocks (“not too hot, not too cold”) exercise. Any “just right” legislation, to garner 51 votes, must placate deficit hawks (McCain, Corker, Flake), moderates (Susan Collins, Lisa Murkowski) and staunch conservatives (Mike Lee, Tom Cotton, Ted Cruz) — not a group that typically treads on common ground in tax reform. Another wild card to watch is Roy Moore, who won the Republican primary for the special election in Alabama to replace Sen. Jeff Sessions. Moore is widely expected to win the December 12 election and, once elected, will be the most far-right member of the Senate and a true wild card vote in tax reform. To sum it up, the path is clear, but the margins are slim. Most insiders believe that the legislation must pass both chambers by June of next year — at the latest — lest the effort collapse under its own weight. So, the billion-dollar question: Will it happen? Prognosticating about tax reform prospects has long been a favorite parlor game in Washington, and, as Joseph Thorndike said, smart money almost always bets against it. This time, it’s a close call, but the desire among Republicans to get tax reform done is at a near all-time-high, particularly after the failure of health care reform. My money (smart or not) is on the passage of a tax bill — with significant reform elements. In short, insurers should watch this space.

Artificial intelligence is booming in insurance. In a recent report, Celent identified AI use cases around the globe and across the insurance value chain. Uses include customer engagement (USAA’s Nina); product optimization (Celina Insurance Group, Protektr); marketing and sales (Usecover, Insurify, Optimal Global Health, Ping An); underwriting (ZestFinance, SynerScope, Intellect SEEC, Swiss Re); claims (Tractable, Ant Financial, Gaffey Healthcare); fraud detection (Ant Financial, USAA); risk management (Achemea); and business operations (Ping An Direct, Union Life). Insurers are wise to innovate with AI technologies. Early adopters will face challenges but will also have the potential to reap greater rewards by improving efficiency and customer engagement. Here are five challenges for carriers to consider when innovating with AI: 1. What technology to use when. When embarking on a digital transformation, there may be a number of solutions available for a given problem, one of which could be AI. But while AI may resolve an issue, it is important to examine all the potential solutions and decide which one is the best fit. Perhaps robotic process automation (RPA), application programming interface (API) or another automated solution is best suited. Can an existing technology be leveraged? Deciding what solution to apply when requires you to look at the whole organization and all the issues upfront. This allows CIOs and CEOs to examine each problem, decide on the right technology solution and make sure it complements the overall strategy and budget. See also: Strategist’s Guide to Artificial Intelligence   2. Big data + AI = big strategy. A second challenge surrounds the management of big data obtained from customers, core systems, brokers/agents and insurance exchanges. Add to that the varied types of data that AI is managing, analyzing, communicating and learning from and things get a little more complicated. Here’s a list of the different data types AI may be working with:

• Structured, semi-structured and unstructured data
• Text
• Voice
• Video
• Images
• Sensors (IoT)
• Augmented/virtual reality

Data is also classified as real-time, historical or third-party — yet another dimension to consider. Make sure your strategy takes the necessary data variables into account: where data will come from, where it will flow to and how it will be handled at various points in the customer journey. 3. Managing customers across swim lanes. This leads us to challenge No. 3: the ability of AI to engage with customer data at key touchpoints during the customer lifecycle. For example, if Lucy has group benefits as well as voluntary products, car and house insurance, how will her data be managed and optimized across swim lanes? What will be the touch points for AI? When will other insurtech solutions be present? When is human intervention required? And how will this data be used to inform future risk decisions? 4. Harnessing AI’s multidisciplinary capabilities. AI encompasses machine learning, deep learning, natural-language processing, robotics and cognitive computing, to name a few. You can read my blog post here to learn more. Deciding what technical abilities will be required to solve your problem could present challenges as the lines between disciplines blur. Additionally, the next wave of AI could come from entirely different industries, such as aerospace, environmental science or health — but  it will still have applications for insurance. The best way to overcome this is to examine your AI needs across solutions and select vendors with the right capabilities to execute them. See also: The Insurer of the Future – Part 3   5. Communicating past tech speak. As AI becomes mainstream, the challenge of helping non-technical business professionals understand these complex applications is real. AI systems can require a level of technical expertise beyond the everyday scope of business. True digital transformation, regardless of technical complexity, affects everyone in the organization. Ensuring the vision is shared will matter as day to-day operations, tasks and activities change. Find someone who can break down the benefits of these new solutions into bite-sized pieces that everyone understands to ensure buy-in and ultimate success. The question of whether AI will indeed disrupt the industry or simply enable its full digitization is still not known. It will not be the solution to every problem. However, if implemented strategically, it may hold the capacity to create an entirely new way of insuring — and delighting — customers in a rapidly changing landscape.

To say that the insurance industry is undergoing change is a profound understatement. And the change is not limited to one operational area or role. An important tool to help insurance companies keep pace with constant disruption is robotic process automation (RPA) — a digital technology that automates rules-based, deterministic processes across many areas within an organization. RPA offers a wide range of benefits, including: the elimination of human errors; improved compliance; time reduction and enhanced productivity; cost reduction; and the enablement of staff to focus on more valuable work. As the insurance industry grapples with how to best balance the increasing role of automation with the human workforce, a couple of questions come to mind: How can this technology help organizations meet clients’ increasing expectations? And, more broadly, what kind of impact will RPA and automation have on operational processes in such areas as customer experience, insurance policies and risk assessment, pricing and management? While the applications of these technologies create some uncertainty, the upside is tremendous — both from an operations and workforce perspective. RPA, like other digital technologies, functions as a digital asset that enhances the workforce, drives productivity and generates efficiencies — like the excel macro did for spreadsheets and the calculator did for manual computation before it. To better understand the context in which these changes are taking place, it is important to move from the abstract to the concrete. RPA benefits insurance companies in a number of ways. A few practical examples include:

• Customer experience
• Policy and data conversions
• Risk assessment, pricing and management

Customer experience Customer service is a cornerstone of the insurance industry. Having knowledgeable people paired with the right technologies helps improve the customer experience significantly. RPA, integrated into digital portals, can enhance customer experience by capturing, manipulating and processing data into legacy systems of record directly from client and marketing channels. See also: Much Higher Bar for Customer Service   Traditionally when onboarding new customers, data moves into queues processed individually by humans. This approach requires humans to flag missing data, gauge the completeness of the request and then move this information from “one side of the desk to the other,” so to speak. Providing a prospect with a quote could take days of back-and-forth to flag and gather the right data. For example, a life carrier seeking to speed up response times can use RPA to remove the too-long, manual processing of broker requests, which often are unclear or lack necessary details. Today, requests could wait in a queue for human review only to be then passed on to another group to rectify issues before the carrier could respond. The process could take days. Insurers are now using RPA to evaluate requests upon arrival, immediately flag inaccurate or missing information and initiate follow-up requests. Response times are reduced from a couple of days to minutes. This automated process benefits customers, the workforce and business growth. Policy and data conversions The global insurance industry handles hundreds of millions of policies. Combining those with the sheer amount of data insurance companies need to process and crunch can make one’s eyes glaze over. To make matters more challenging, a tremendous amount of policy data still resides in legacy systems. And when insurers need to migrate to a new/different system, the process is manual, time-consuming and resource-intensive. What is the answer? Using RPA to digitize conversion processes. Consider a life insurer that implements robotics to migrate legacy life insurance and annuity policies from a newly acquired portfolio of business. Instead of allocating 50-70 people to manually rekey the information, that company can now move policy and annuity data — some of which was unstructured — from the acquired company’s system into the acquiring company’s system. RPA can perform these tasks for millions of policies, eliminating the manual, error-prone aspects of the work. RPA can operate 24 hours a day, seven days a week. This process allows for an alternative approach, one which could be more efficient, accurate and audit-able. It also allows employees to focus on more strategic, higher-value work like product development. Risk assessment, pricing and management Actuaries are typically inundated with an immense amount of claims data to sift through to help inform risk assessments. To help drive efficiency, RPA helps actuaries solve these challenges by reducing manual input and rekeying, reading disparate types of data (structured and unstructured) and identifying omissions and errors. Access to more accurate and insightful data enables actuaries to improve risk modeling and pricing. Ultimately, this frees up high-value actuaries' time to focus on better risk assessments with a higher degree of accuracy. What’s next? The rapid pace of disruption shows no signs of abating. While it is easy to get sucked into the hype around RPA and broader automation applications, it is important to approach this process with a thoughtful purpose in mind — one that is targeted and deliberate. RPA is a game-changer. The insurance industry is automating manual, repetitive and tedious tasks, allowing employees to focus on more valuable, strategic work. This helps not only with efficiency but can drive a greater level of engagement and fulfillment. See also: The Current State of Risk Management   The future of work will involve machine and human collaboration. RPA will be a critical part of that evolution and will work in conjunction with other disruptive technologies, such as artificial intelligence, to continually improve the quality and consistency of the service insurers deliver to their customers. Digital resources will function as critical assets to drive stronger organizational efficiency and performance. Companies that are best able to balance the intangibles of human ingenuity, with the efficiencies of RPA and other forms of automation, will be best positioned to reap the benefits. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

The first day at a new job means a new company, new responsibilities, new co-workers, a new commute--a whole new routine. Employers have a lot at stake, too. Many people put a lot of time and energy into picking this new hire. They're counting on that person to get up to speed quickly and start contributing. They need the new employee to be a good fit. But according to researchers, new hires aren't focused just on fitting in, they're thinking about reinventing themselves. A new job and a new social setting represent a rare opportunity for people to show their authentic selves or even to reshape their personalities. It's like the first day at a new school--a clean slate and a chance to be somebody new. Given this motivation, researchers argue that most organizations focus way too much attention on getting new hires to fit in. There's certainly a lot for a new employee to learn, and the sooner they get up to speed, the sooner they can have a positive impact. As many of us have seen from our own careers, it's tough to do a lot of actual work on your first day. It's much more about learning about the organization and the role you're going to play. See also: How to Shrink Employees’ Waistlines   Take a look at the top three reasons people quit their jobs within six months, according to a survey by BambooHR:

• They decided that the work was something they didn't want to do any more.
• They felt that they were given different work from what they expected based on their interview.
• The boss was a jerk.

While these may look like problems with the work and responsibilities at first glance, they may actually have more to do with cultural issues like incompatible management styles and unclear expectations. With a few tweaks, you can shift your organization's approach to an employee's first day and help employees define themselves within your organization rather than feeling like they have to change to fit in. That shift, coupled with some other first-day best practices, can get employees up to speed and productive much more quickly. Here are some ideas to get you started: 1. Keep paperwork to a minimum New hires walk through the doors on their first day ready to hit the ground running and prove their value. They want to define their identities, and that usually includes being seen as a hard worker. But at too many organizations, that zeal is squandered on administrative activities like filling out HR forms. The result is a notable dip in spirit and some paperwork that's filled out really, really well. As much as possible, keep administrative tasks to a minimum on an employee's first day. Ideally, new hires will fill out all or most of the forms before their first day. Here's a great way to communicate a little culture--send an email that says, "We can't wait for you to dig right in on your first day, so please complete this paperwork and bring it with you." 2. Prepare for downtime No matter how prepared you are to welcome a new employee, he or she is going to have some downtime on day one. Inevitably, a meet-and-greet will get rescheduled or something unexpected will crop up, leaving the new hire having an hour to kill. Even after day one, new hires aren't likely to accelerate to full throttle right away. It will take some time--days, weeks or months, depending on the complexity of the job--before a new hire hits full stride. Continuing engagement and coaching is critical during this onboarding phase. Have a plan in place that goes beyond just sending the employee back to her desk to, say, fill out paperwork. Instead, give new employees a chance to express some of their personality with an introductory email. Encourage them to be a little less formal, to share a bit of their personal lives and why they're excited to join the team. A better option is to set them up with a learning list: online courses, books, articles, webinars and podcasts to help them learn how your organization sees the industry and to show that lifelong learning is a top priority. Ideally, this list would be created internally as one more way to demonstrate your culture. But there are plenty of external sources, including The Community and other collections of resources. 3. Show your culture One of the best ways to help new hires find their niche within your organization is to give them a glimpse into your culture from day one. Make a point to include the new hire in social activities in your office--a group lunch, an afternoon trivia challenge, chats about popular TV shows, etc. New employees will feel like part of the team and get a chance to show a little personality. Demonstrating your culture doesn't require fun distractions. Bringing the new hire in on a brainstorm session or setting up an informal meeting with a company leader can also showcase the attitudes and behaviors your organization values most. Or it could be as simple as sneaking a little bit of your company perspective into your welcome letter. Here's how Apple, for example, welcomes new employees. See also: The Era of Free Agent Employees   4. Start your formal onboarding process Don't forget to incorporate your employee's first day into your formal onboarding process. As you work to make the first day engaging and culture-focused, also set the new hire up with a clear path to success over the first several months on the job. Help the new employee develop a support network, including a mentor, and be sure that new employees know where to turn for the resources they need to do their job successfully. Peer-to-peer learning is a powerful tool that gives employees a certain sense of independence and belonging, which are important attributes to success. Connecting new hires to others who have recently been in the same situation can also help ease new hires into their role and help keep them on track to success. If you choose to assign new hires a mentor (and you absolutely should), that mentor can take the lead on a lot of these day-one activities, from organizing a company lunch to making the most of downtime. Be sure to schedule periodic meetings to catch up with new hires. These scheduled meetings give both the hiring manager and the new hire some dedicated time to review progress, answer questions and stay engaged with one another. Like many things in life, you will get out of new hire onboarding process only what you put into it. While it takes precious time and effort, the cost of not successfully onboarding your new hire is even greater, and a failed hire will put you right back to the beginning of the hiring process and further from realizing the organization's goals. Want to bring new employees up to speed in the rapidly changing insurance industry? An AINS designation is a good place to start.

The previous articles in this series can be found here. The Insurer of the Future will be class-leading in customer relationship management (CRM) and marketing. CRM was always a challenge in the past because, unlike banks and retailers, insurers had only small numbers of interactions with their end customers. That made it hard to gather data on the customers’ needs and wants, and limited the ability to build relationships. See also: The New Agent-Customer Relationship   But the Insurer of the Future has access to enormous quantities of data about its customers, available from a wide range of external sources. So it ports this data into its own systems, fueling more powerful and accurate analytics. It uses the insights gleaned to reach out to customers -- not just to sell them products but to provide genuine value-adds. Providing value adds to customers, free of charge, enhances customer relationships. So when the Insurer of the Future makes an occasional offer to a customer, it’s the right offer, at the right time, through the channel and device of the customer’s choice. As a result of the Insurer of the Future’s expertise, the customer is significantly more likely to buy. Compared with its predecessors, the Insurer of the Future has a loyal customer base -- driving lower lapse/churn rates, a greater share of wallet and higher Net Promoter Scores.