In the U.S., the life insurance participation rate is in a steady decline, reaching new lows each year. This, coupled with insufficient savings, creates financial instability for millions. An early or unexpected death of a loved one creates a vacuum of loss, bills, debt and reduced income that is both devastating and unnecessary. Preventable poverty due to lack of savings and insurance is on the rise, even among the employed and financially thriving. Analysts and industry leaders have tried to understand the motivations and aspirations of millennials who “believe they will live forever” or haven’t grown up and “live in their parents’ basements.” While psychological and lifestyle factors certainly contribute to empty savings accounts and a dearth of insurance policies, the truth is a far more mundane structural issue: no one is selling insurance to the younger generation. The industry adage that life insurance is “sold, not bought,” is proving true through its decline. The historical insurance sales approach – an army of captive and independent insurance agents providing a consultative sale to customers—is becoming more and more ineffective over time. Today, only 26% of Americans own their own life policies. Why is that? The average age of a life insurance agent in the U.S. is 59, and agents tend to sell within five years of their own age. This leaves the bulk of millennials and even Gen X potential customers without the advice, education and handholding that their insured predecessors have had. This gap leaves young families, who most desperately need the protection, underinsured and in a state of potential poverty if tragedy strikes. This endemic crisis is evident on the memorial pages of GoFundMe, where one can scroll through page after page of “my brother-in-law suddenly passed away and the family needs help to pay for the funeral and provide for the family.” Successful campaigns raise as much as $50,000 – an amount woefully low for the future liabilities of family and future. See also: Where Price-Focused Sales Are Heading   Younger customers have different needs and priorities than previous generations. They prefer to use technology to find the information they need about insurance and to buy a policy. Many younger customers are not sold on the need for life insurance; however, once educated on the benefits are likely to purchase a policy. In fact, 86% of Americans overestimate the cost of life insurance, some by as much as 300%. And among the insured in America, many are grossly underinsured, including the 32% who have less than $100,000 in coverage. Insurance innovations In the last 50 years, the way insurance companies do business has changed very slowly. Even in recent years, where other industries such as banking, payments and retail have had to shift their distribution models in major ways, insurance is still only dipping its toes in new sales models, even as their workforce careens toward retirement. That said, there have been incredible leaps forward in making it easier for consumers to BUY insurance. Insurance companies are investing hundreds of millions in expanding products and services to make it easier for the interested buyer to make an informed purchase quickly, less intrusively and for the best price, all while retaining the financial viability that customers require. Key investments in data and analysis gave birth to no-exam life insurance policies known as simplified issue insurance. These policies require no medical exam or blood test and are beginning to be offered at greater and greater face values. This innovation is made possible through a massive data-sharing initiative between healthcare providers, insurers and governments. The data-sharing allows insurers to gather information to assess various risk factors for potential policyholders, even in the absence of the medical exams and blood tests that were once necessary. Many insurance carriers have also pivoted their direct marketing focus to online sales and digital purchase and enabled a new generation of price comparison engines to ensure those in the market for a policy can easily buy it. Some of these shifts have created channel conflict with the declining direct salesforce, and that conflict often results in hamstrung marketing initiatives that attempt to satisfice amid this dialectic and strategic conflict. These one-sided investments on the buy side of insurance primarily serve the needs of those who have already opted into the marketplace. But that leaves the question: Where is the real innovation that will close the insurance sales gap? Closing the sales gap? In a world where three in four Americans do not own life insurance and 50% of millennials would have an immediate financial need if something were to happen to the primary wage earner in their household, it is now a societal need to close this gap. The insurance industry needs to look beyond its own agents. Consumers depend on many advisers for financial services, and the industry needs to engage those providers. Paving the way for broader licensing and reducing barriers erected to protect carriers (not the ones for protecting consumers) will help bring more educators and salespeople to the industry. Insurance digital investments must do more than digitize the past. While making it possible to buy insurance online is an advance, it still resides in the Web 1.0 world of price-comparison and lead generation. Break down barriers between insurance and adjacent industries. While it has always been true that the person who designs your estate plan is not the person who sells you the appropriate amount or insurance or defines your future investment needs, the consumer doesn’t want to find multiple vendors and convince them to work together. In a modern world, these artificially siloed industries should simply work together. See also: How to Move to the Post-Digital Age?   It was through these observations with fellow World Economic Forum attendees that I saw the need to create the Tomorrow app. Using Tomorrow, families can set up a trust fund for free, including a free will and revocable living trust. In fact, it’s a social experience one does with family and friends who will take on roles such as guardian, executor and trustee. Then, with an understanding of one’s family and finances, Tomorrow educates its customers about their insurance gap, prices the policies that close that gap and brings customers to a policy application. Because Tomorrow leverages all of the data entered to create their trust funds, customers complete the application in three to five minutes, and the policy is added to their trust. For simplified issue policies, that is often the end of the customer’s work, and policies are issued in a matter of days. Sales innovation is the way forward McKinsey estimated in 2015 that 20% of insurance agents in the U.S. would retire by 2018, leaving a talent gap in an industry that already has a worker shortage. This is significant on its own, but, considering that current insurance agents fail to reach the under-40 set, more than ever the industry desperately needs disruptive changes. The only way forward is innovation in insurance sales through breaking down barriers, investing in modern digital approaches and looking beyond the insurance industry. The article was originally published here.`

If insurtech disruptors have one thing going for them, it’s their digital savvy. They have made it as easy for consumers to research, quote and buy coverage online as it is to make a retail purchase through e-commerce channels. “It took me 60 seconds to buy a policy,” a customer of one disruptor said. Still, insurtech disruptors have a lot to learn about the industry, and some leading incumbents could be the ones to teach them. The Disruptor’s Downward Spiral To understand this better, let’s follow Judy, a quintessential customer as she excitedly makes the decision to purchase insurance from a typical disruptor. First, she enters the site. It’s sleek and beautiful, and everything is easy to locate. Within seconds, she has selected the option to get a quote for her auto insurance, has entered her information and received a price she can live with. Hooray! But wait. Where is the coverage for her home, motorcycle and pet? She searches the site but can’t find other insurance products. She clicks the help button, but all she can do is send an email with her question. Where is the personal touch? And how will she contact someone later when she has a question about her coverage or, worse, a claim? See also: What’s Your Game Plan for Insurtech?   The Lessons The first thing disruptors need to learn is that the quick, convenient online service they are peddling is only the baseline model of what consumers expect from their carriers. Comments from other customers echo Judy’s feelings about the personal touch: “They do not have a phone number, so you are stuck dealing with bots and sending messages through their app.” Hmmmm. Sounds like someone needs an agent. Greg Hoeg, vice president of U.S. insurance operations at J.D. Power, concurs, “While many consumers want to shop online, they often still want to talk to someone when they buy their insurance to make sure they are getting the right coverage or have questions about their policy answered.” J.D. Power also confirms the importance of digital channels in the buying process, reporting that incumbents with leading digital capabilities also lead in premium growth. And this is where incumbents come in to teach the disruptors a thing or two. Following a Better Example Top digital insurers are setting the best example of how to thrive in the changing market. They have continuously improved their capabilities to meet consumer demands for online buying and product choice and have empowered agents with top-grade digital tools. Here is what Judy’s purchasing journey looks like with a traditional insurer imbued with the right digital capabilities and product selection: Judy enters the site and begins the application process. After providing a few bits of personal data, a smart application process begins to draw information from verified third-party sources, auto-filling her application along the way. Throughout the process, she is asked if she would like to add other types of coverage she is eligible for, such as home, jewelry or pet insurance. She clicks "yes" and is soon provided with quotes on multiple options. She has a question about one of the offerings, so she dials the number prominently displayed at the top of the screen. Soon, she is talking with an agent who answers her questions and, without having to gather more information, quickly and seamlessly binds and issues all of the coverage types she wants to buy, in a single transaction. Experiences like these are not the future of insurance. The capabilities exist today, without making extensive changes to current systems. A top-five insurer is already setting the example. It now meet the needs of 95% of current and future customers contacting the agency and has doubled year-over year growth through direct and agent channels. Insurers like these have a message for insurtech disruptors and incumbents alike. It’s time to implement digital solutions and start meeting consumer needs for channel and product choice. See also: Insurtech Checklist: 10 Differentiators   To learn more about outcompeting in a changing industry, download our thought leadership piece, The Changing P&C Insurance Industry: What’s It Costing You?

It is projected that, by the year 2020, there will be 7 million drones in the U.S. alone. Most consumers buy drones for recreational use, but businesses have begun to use drones, as well. Drones are used by photographers to obtain better camera angles, by farmers for crop surveillance and by media outlets for coverage of newsworthy events. Amazon has even launched Amazon Prime Air, which uses drones to get shipments to customers in 30 minutes or less. A similarly important shift is the rise of the gig economy, in which 55 million Americans offer their services and assets — homes, cars, labor — to earn supplemental or full-time income. Recently, these two phenomena have intersected. Drone use, in combination with the gig economy, will significantly improve various aspects of the insurance supply chain. See also: Gig Economy: Newest Tool for Insurance   Insurance and Drones Drones can help the insurance industry by improving data quality, providing unprecedented views, ensuring safety and increasing the speed at which claims can be resolved. These new realities are incredibly important for the insurance sector. By flying drones over damaged houses or other properties, operators can acquire high-quality video footage that accelerates and improves claims resolution processes. Drone footage can immediately be sent back to carriers for analysis. Drones can significantly reduce the risks associated with field inspections. By leveraging drones, insurance adjusters can avoid climbing ladders and even setting foot in damaged buildings. Operators can remain safely on the ground and fly their drones over damaged property or disaster areas. Insurance and the Gig Economy Insurance carriers are already able to tap into the power of gig economy platforms to complete any number of tasks. At WeGoLook, for instance, we connect a network of 30,000 gig workers with insurance carriers across North America. At the swipe of a smartphone, a Looker can be dispatched to conduct a damage assessment, asset verification, scene inspection, document retrieval or any number of other tasks or processes. The gig economy not only offers insurers the ability to fulfill these needs affordably and at scale, but it can also help to accommodate workload surges brought on when natural disasters strike. Bringing It All Together Gig economy platforms are now beginning to offer drone services. These services combine the power of drone technology with the convenience and accessibility of gig solutions, making drones more accessible than ever for insurers. Gig workers who own drones can be dispatched by insurers to conduct a variety of tasks. An insurer could hire its own drone workforce, but this would be time-consuming and expensive. Gig platforms allow insurers to completely outsource drone operation and training that would otherwise require significant upfront investment. Further, insurers don’t need to worry about how to train operators, conduct maintenance or insure against unintended damages. The gig economy’s on-demand model can be tapped at any moment. This efficiency, combined with the use of drones, is vastly improving the time to process insurance claims. WeGoLook’s COO, Kenneth Knoll, provides an example of this type of efficiency: “We recently received an assignment that involved capturing aerial imagery of a commercial location where an injury occurred and details were needed as part of the case. As opposed to photos from the ground, the aerial imagery was much more effective to illustrate the exact conditions of the scene in question. Plus, our drone footage was delivered to the carrier within 24 hours, thanks to the efficiency of our on-demand workforce.” Given all the benefits of drone technology and the increasing availability of drone services via gig economy platforms, there’s a good chance that a drone will be involved in your next insurance claim. Insurance professionals and customers can look forward to better data, faster resolution times and safer inspections. See also: What Gig Economy Means for Insurers   Final Thoughts Roughly 34% of the U.S. workforce currently participates in the gig economy in some way. When you combine these numbers with 7 million drones that will be owned by Americans by 2020, this creates the potential for a vast network of drone pilots working in a freelance capacity. These freelance drone pilots can be helpful for insurance companies, insurance policyholders and gig economy companies that crowdsource and connect them with jobs. There’s no doubt that drones, in combination with the gig economy, will bring significant benefits for the insurance industry.

According to the World Health Organization, mental health is described as: “a state of well-being in which every individual realizes his or her own potential, can cope with the normal stress of life, can work productively and fruitfully and is able to make a contribution to his or her community.” But the World Health Organization’s definition applies only to part of the population. At any given time, one in five American adults suffers with a mental health condition that affects their daily lives. Stress, anxiety and depression are among the most prevalent for injured workers. Left untreated, they can render a seemingly straightforward claim nearly unmanageable, resulting in poor outcomes and exorbitant costs. Increasingly, many in our industry are recognizing the need to do all we can to address this critical issue. We must openly discuss and gain a deep understanding of a subject that, until now, has been taboo. Four prominent workers’ compensation experts helped us advance the conversation on mental health in the workers’ compensation system during a recent webinar. They were:

• Bryon Bass, Senior Vice President for Disability, Absence and Compliance at Sedgwick
• Denise Zoe Algire, Director of Managed Care and Disability for Albertsons Companies
• Maggie Alvarez-Miller, Director of Business and Product Development at Aptus Risk Solutions
• Brian Downs, Vice President of Quality and Provider Relations at the Workers’ Compensation Trust

Why It Matters Mental health conditions are the most expensive health challenges in the nation, behind cancer and heart disease. They are the leading cause of disabilities in high-income countries, accounting for one third of new disability claims in Western countries. These claims are growing 10% annually. In addition to the direct costs to employers are indirect expenses, such as lost productivity, absenteeism and presenteeism. Combined with substance abuse, mental health disorders cost employers between $80 billion and $100 billion in these indirect costs. In the workers’ compensation system, mental health conditions have a significant impact on claim duration. As we heard from our speakers, these workers typically have poor coping skills and rely on treating physicians to help them find the pain generator, leading to overuse of treatments and medications. See also: Top 10 Ways to Nurture Mental Health  More than 50% of injured workers experience clinically related depressive symptoms at some point, especially during the first month after the injury. In addition to the injured worker himself, family members are three times more likely to be hospitalized three months after the person’s injury. Many speculate that the distraction of a family member leads the injured worker to engage in unsafe behaviors. Mental health problems can affect any employee at any time, and the reasons they develop are varied. Genetics, adverse childhood experiences and environmental stimuli may be the cause. The stress of having an occupational injury can be a trigger for anxiety or depression. These issues can develop unexpectedly and typically result in a creeping catastrophic claim. One of our speakers relayed the story of a claim that seemed on track for an easy resolution, only to go off the rails a year after the injury. The injured worker in this case was a counselor who had lost an eye after being stabbed with a pen by a client. Despite his physical recovery, the injured worker began to struggle emotionally when he finally realized that for the rest of his life he would be blind in one eye. Because his mental health concerns were raised one year after the injury, there were some questions about whether he might be trying to game the system. Such stories are more commonplace than many realize. They point out the importance of staying in constant contact with the injured worker to detect risk factors for mental health challenges. Challenges Mental health conditions — also called biopsychosocial or behavioral health — often surprise the person himself. Depression can develop over time, and the person is not clued in until he finds himself struggling. As one speaker explained, the once clear and distinct lines of coping, confidence and perspective start to become blurred. In a workers’ compensation claim, it can become the elephant in the room that nobody wants to touch, talk about or address. Organizations willing to look at and address these issues can see quicker recoveries. But there are several obstacles to be overcome. Stigma is one of the biggest challenges. People who realize they have a problem are often hesitant to come forward, fearing negative reactions from their co-workers and others. Depictions of people suffering from behavioral health issues in mass media are often negative, but are believed by the general public. Many people incorrectly think mental health conditions render a person incompetent and dangerous; that all such conditions are alike and severe; and that treatment causes more harm than good. As we learned in the webinar, treatment does work, and many people with mental health conditions do recover and lead healthy, productive lives. Avoiding the use of negative words or actions can help erase the stigma. Cultural differences also affect the ability to identify and address mental health challenges. The perception of pain varies among cultures, for example. In the Hispanic community, the culture mandates being stoic and often avoiding medications that could help. Perceptions of medical providers or employers as authority figures can deter recovery. Family dynamics can play a role, as some cultures rely on all family members to participate when an injured worker is recovering. Claims professionals and nurses need training to understand the cultural issues that may be at play in a claim, so they do not miss the opportunity to help the injured worker. Another hurdle to addressing psychosocial issues in the workers’ compensation system is the focus on compliance, regulations and legal management. We are concerned about timelines and documentation, sometimes to the extent that we don’t think about potential mental health challenges, even when there is clearly a non-medical problem. Claims professionals are taught to get each claim to resolution as quickly and easily as possible. Medical providers — especially specialists — are accustomed to working from tests and images within their own worlds, not on feelings and emotional well-being. Mental health issues, when they are present, do not jump off the page. It takes understanding and processes, which have not been the norm in the industry. Another challenge is that the number of behavioral health specialists in the country is low, especially in the workers’ compensation system. Projections suggest that the demand will exceed the supply of such providers in the next decade. Our speakers explained that, with time and commitment, organizations can persuade these specialists to become involved. Jurisdictions vary in terms of how or whether they allow mental health-related claims to be covered by workers’ compensation. Some states allow for physical/mental claims, where the injury is said to cause a mental health condition — such as depression. Less common are mental/physical claims, where a mental stimulus leads to an injury. An example is workplace stress related to a heart attack. See also: New Approach to Mental Health   “Mental/mental claims” mean a mental stimulus causes a mental injury. Even among states that allow for these claims, there is wide variation. The decision typically hinges on whether an "unusual and extraordinary" incident occurred that resulted in a mental disability. A number of states have or are considering coverage for post-traumatic stress among first responders. The issue is controversial, as some argue that the nature of the job is, itself, unusual and extraordinary and that these workers should not be given benefits. Others say extreme situations, such as a school shooting, are unusual enough to warrant coverage. What Can Employers Do Despite the challenges, there are actions employers and payers are successfully taking to identify and address psychosocial conditions. For example, Albertsons has a pilot program to identify and intervene with injured workers at risk of mental health issues that is showing promise. The workers are told about a voluntary, confidential pain screening questionnaire. Those who score high (i.e., are more at risk for delayed recoveries) are asked to participate in a cognitive behavioral health coaching program. A team approach is used, with the claims examiner, nurse, treating physician and treating psychologist involved. The focus is on recovery and skill acquisition. A letter and packet of information is given to the treating physician by a nurse who educates the physician about the program. The physician is then asked to refer the injured worker to the program, to reduce suspicion and demonstrate the physician’s support. Training and educating claims professionals is a tactic some organizations are taking to better address psychosocial issues among injured workers. The Connecticut-based Workers’ Compensation Trust also holds educational sessions for its staff with nationally known experts as speakers. Articles and newsletters are sent to members to solicit their help in identifying at-risk injured workers. Continuing communication injured workers is vital. Asking how they are doing, whether they have spoken to their employer, when they see themselves returning to work reveal underlying psychosocial issues. Nurse case managers can also be a great source of information and intervention with at-risk injured workers. Changing the workplace culture is something many employers and other organizations can do. Our environments highly influence our mental health. With the increased stress to be more productive and do more with less, it is important for employers to make their workplaces as stress free as possible. Providing the resources to allow employees to do their jobs and feel valued within the organization helps create a sense of control, empowerment and belonging. Helping workers balance their work loads and lives also creates a more supportive environment, as does providing a safe and appealing work space. And being willing to openly discuss and provide support for those with mental health conditions can ensure workers get the treatment they need as soon as possible. As one speaker said, “By offering support from the employer, we can reduce the duration and severity of mental health issues and enhance recovery. Realize employees with good mental health will perform better.” To listen to the full webinar on this topic, click here.

Our chief innovation officer, Guy Fraker, has been talking to dozens of major companies since he joined us a couple of months ago and has found that many innovation efforts at incumbents are stuck. The companies know they need to do something to take advantage of opportunities and to head off competitive threats, but they generate some ideas and … well, then what?

Guy gets companies un-stuck. That’s what he’s done in his distinguished career as an innovation leader, focusing on insurance, and that’s what he’s doing now. He has crystallized his thinking into six stages that innovation programs must go through to succeed. Here is the short version:

--Are you sure?

The decision that seems intuitively correct is often not the best way to go – and the mistake does not become evident for some time. So, stop for a moment and define success. For instance, innovators who start at $0 and grow revenue to $1 million may exult. But will $1 million work for a company with $10 million of existing revenue? $100 million?

Are you really ready to go to market in a new way? To disrupt your business model?

--Deciding strategy

A frequently asked question is, "How do we foster a more innovative culture?” Guy says he responds: "Innovate for growth, and let the requirements for success change the culture."

Corporate innovators must be able to move faster than an organization’s ability to say "no,” but here’s a secret: The key is not thinking "outside the box." The key is actually having leaders define the box within which they want innovation to happen – innovation responds to constraints.

Don’t underestimate the power of people’s enthusiasm when selecting your strategic domain. 

--Deciding the basics

Once you start considering startups, investments, new ideas from within the company and new ideas from customers, you quickly feel like you’ve unleashed chaos. You can keep things under control by having a day-long (or shorter) facilitated session that defines the limits of the strategic domain for innovation and of the business models that can be considered. You also need to decide whether to embed the innovation effort in business units or centralize the work.

--Resources

Will a dedicated team be established? Will the efforts be assigned to "virtual resources" (code for: We're going to leave people in their day jobs, and they're going to do this part-time)? And who do they report to? Understand that highly effective executives—even those considered entrepreneurial within mid-sized to large corporations—operate quite differently from entrepreneurs and may not be the right fit.

Guy adds: "I always advocate for off-the-shelf innovation platforms [software]. Some organizations choose to build their own, which almost always proves to be the long road to town. Some organizations choose to go without, avoiding some upfront expense. I assure you that a good innovation platform mitigates the need for three to five full-time employees."

And: "One of the better-kept secrets is that innovation lives or dies in the middle of the organization.  Part of your strategy should be around how leadership will manage the soft spots where participation may be slow in coming."

--Build a portfolio view

Every organization needs a single view of innovation activities, including concepts, startups and early-stage investments that are being considered. The axes vary, but you might think in terms of complexity (from "incremental" to "doesn’t exist today") and time horizons (from "immediate" to "three years"). Ideas that can be executed immediately and represent incremental change will be the most by volume but require the fewest resources. At the other end of the spectrum will be a few, resource-intensive "moon shots."

The key is to create a dashboard that enables an organization to manage the scope and number of concepts/investments in motion. 

--Going to market

Often, the product should be introduced as though from a startup, with a small, dedicated team pounding the streets and using all available resources to market, capture feedback and recommend changes. This approach is very counterintuitive for most large organizations, so you need to lay the groundwork early.

Click here for the long version of Guy's thinking on the six steps to getting un-stuck. Better yet, go here to sign up for Guy’s blog.

Cheers,

Paul Carroll, Editor-in-Chief

I had the opportunity to participate in a high-octane session at the 72^nd Annual WCI Conference in Orlando, FL. With the somewhat imposing title of “The Grand Bargain or Contract of Adhesion: The Ongoing Debate Over Benefit Adequacy, Procedural Efficacy and Blanket Immunity in Workers' Compensation,” it was a 90-minute discussion about both specific state legal challenges and the future viability (constitutionality) of workers' comp overall. It featured Florida defense attorney H. George Kagan, Wyoming law professor Michael Duff, Georgia Administrator and Judge Elizabeth Gobeil and me. It was moderated by Florida plaintiff's attorney Paolo Longo. While we covered a variety of challenges that the industry continues to face, there was one that I regret we did not have the opportunity to address. That one issue is the concept of allowing employers to opt out of workers' comp altogether. Since the Oklahoma Opt Out scheme was torpedoed by the state Supreme Court's upholding of an earlier decision declaring it unconstitutional, many have assumed that this chapter has closed for the industry. We are quite content to put our heads back in the sand and wait for the next crisis before we stir from our slumber. You may pick up from my tone that I believe this to be a mistake. I am predicting here that the “threat” of Opt Out will return, faster than expected, and with an improved concept that will quickly gain traction. I'm telling you, we need to pay attention and be prepared, as this next round will be a more formidable challenge. The advocates of Opt Out have, quite simply, made a few key changes in their pitch and approach, and the changes, for the sake of argument, have merit. The Achilles heel of Oklahoma Opt Out was “exclusive remedy”; the approach had been allowed to develop a closed and tightly controlled system that maintained the benefits of liability protection afforded to employers within the highly regulated workers' compensation system. This was found to provide inconsistent benefits to some workers, and, combined with the one-sided controls granted employers within Opt Out, was deemed an unconstitutional restriction on employees' rights of due process. Today, the backers of Opt Out seem to have learned a lesson and are now proposing an Opt Out scheme that operates without the layer of protections afforded by the exclusive remedy provisions. See also: What Schrodinger Says on Opt-Out  In other words, they are saying, “Allow us to accept the risk of full liability and set up our own alternative plans to mitigate that risk.” Although I am known for my opposition to Oklahoma Opt Out and am not a fan of Texas non-subscription, I believe this concept is more intellectually honest than its Sooner State predecessor and therefore worthy of inclusion in the debate about the future of workers' compensation. With my involvement with “national conversations” on comp over the last year and a half, one thing has become firmly etched in my mind. There is a feeling of frustration simmering in the industry over the regulatory complexity and paperwork required in helping injured workers. There is tremendous appeal in the idea of bypassing all the oversight and just doing the job that needs to be done. After all, in some systems, treatment of the injured worker now seems to be a secondary goal; we can get to it when all the appropriate paperwork has been completed in triplicate and submitted to the various participants that are required to have it. By saying, “We accept the risks of open liability and can control those risks by doing the right thing by our employees,” backers change the argument significantly from that where exclusive remedy protected the employer either way. The new approach is going to have tremendous competitive appeal to employers and the legislators whose ears they reach. There are, of course, concerns with this concept. One of the oft-understated purposes of the “Grand Bargain,” which created a system that was supposed to be no-fault in nature, is that it assures treatment and benefits for the careless and negligent worker. People who represent the injured workers' interests hate to discuss this, but many accidents occur not because the employer was negligent but because the employee screwed up. The employee may have been simply careless or willfully bypassed safety practices. Either way, the injury is often the fault of the worker who suffers it. Workers' comp, with few exceptions covers that. Employers who find no liability in an accident may not. For example, let's say you run a delivery service. You maintain a strict “no texting while driving” policy for your drivers, even going so far as to install apps on company-provided phones that will not allow texting when movement is detected. However, one of your drivers pulls out a personal phone (banned by company policy), over which you have no control, and drives headlong into a tree while texting his BFF. Were you negligent? If you did not have workers' comp, would you need to be concerned with the liability of pain and suffering, loss of consortium and all the other threats of a negligence suit? Unlikely. Without the threat of a suit, would you be compelled to provide medical and indemnity benefits to this worker? Equally unlikely, I would suspect, especially in an Opt Out world. Believe me, there is a real attraction to being released of financial responsibility for things that were not your fault. This really becomes a discussion at a societal level. Are we willing to start assigning blame, potentially placing the burden on taxpayers for injuries that occur while someone is working for the benefit of an employer? Are we ready to return to the days before workers' comp existed? Another issue, of course, will be how the concept is actually created in legislative form. Saying you will accept the risk of open liability is different than legislating that element. As with all things, the devil will be in the details of any specific proposal. These questions will certainly be a part of the debate. In the meantime, the simplicity of bypassing an over-regulated system is going to provide tremendous appeal for some. At our Orlando session, George Kagan observed that Florida legislators have enacted so much legislation for workers' comp that it would make the “central planners of the Soviet Union proud.” Employers will eventually look to escape an overly complex system where regulators cannot even agree on a simple standardized reporting form. When the argument can be successfully made that benefits for the injured worker can be improved by leaving a burdensome system, then we will have a real dogfight on our hands. See also: Debunking ‘Opt-Out’ Myths (Part 6)   PartnerSource President Bill Minick, who is the primary supporter of the Opt Out concept, and I do agree on a couple things. One of those is that competition is healthy and almost always results in improved service for all. The concept that backers are beginning to put forth represents the opportunity for true competition to a system that cannot seem to respond to other external stimuli. I remain a vociferous advocate for the workers' comp system; its importance in stabilizing a contentious area of labor relations has been well proven over the past 100 years. However, I also want to see a vibrant and relevant workers' comp system for the next 100 years. That means we must address some of our issues head on, and answer the questions about what is important to us as a society. Opt Out will again soon be an issue we are debating, but with a change in focus on their side. It will be a concept worthy of a larger debate. It will be a debate that we best be ready to participate in.

Insurance telematics has been out there for more than 20 years. Many insurers have tried to play with the technology, but few have succeeded in using the data available from connected telematics devices. The potential of this technology was misunderstood, and best practices have remained almost unknown, as it was not common in the insurance sector to look for innovation in other geographies, such as Italy, where progress has been made. But the insurance sector is being overtaken by a desire to change, and it’s becoming more common to see innovation scouting taking place on an international level. In the last two years, billions of dollars have been invested in insurance startups; innovation labs and accelerators have popped up; and many insurance carriers have created internal innovation units. On the other hand, I’m starting to hear a new wave of disillusion about the lack of traction of insurtech initiatives, the failure of some of them, or insurtech startups radically changing from their original business models. In a world that tends toward hyperconnectivity and the infiltration of technology into all aspects of society, I’m firmly convinced all insurance players will be insurtech—meaning they all will be organizations where technology will prevail as the key enabler for the achievement of strategic goals. See also: Telematics Has 2 Key Lessons for Insurtechs   Starting from this premise, I’d like to focus on two main points:

1. The ability of the insurance sector to innovate is incredibly higher than the image commonly perceived.
2. While not all insurtech innovations will work, a few of them will change the sector.

In support of the first point, consider the trajectory of digital insurance distribution. The German Post Office first experimented with remote insurance sales at the beginning of the 1980s in Berlin and Düsseldorf using Bildschirmtext (data transmitted through the telephone network and the content displayed on a television set). Almost 60% of auto insurance coverage is now sold online in the U.K., and comparison websites are the “normal” way to purchase an auto insurance policy. In few other sectors is one able to see comparable penetration of digital distribution. In the health insurance sector, the South African insurer Discovery demonstrates incredible innovation, as well. 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 even healthy food purchases. Discovery has been able to replicate this “Vitality” model in different geographies and different business lines and to exploit more and more usage of connected devices in its model each month. Vitalitydrive by Discovery rewards drivers for driving knowledge, driving course attendance and behavior on the road with as much as 50% back on fuel purchases at certain stations. More than 12 months ago, I published my four Ps approach for selecting the most interesting initiatives within the crowded insurtech space. I believe initiatives will have a better chance to win if they can improve:

• Productivity (generate more sales).
• Profitability (improve loss or cost ratios).
• Proximity (improve customer relationships through numerous customer touchpoints).
• Persistency (account retention, renewal rate increase).

Those insurtech initiatives will make the insurance sector stronger and more able to achieve its strategic goal: to protect the way people live. One trend able to generate a concrete impact on all four Ps is connected insurance. This is a broad set of solutions based on sensors for collecting data on the state of an insured risk and on telematics for remote transmission and management of the collected data. In a survey of ACORD members by the North American Connected Insurance Observatory, 93% of respondents stated this trend will be relevant for the North American insurance sector. It’s easy to understand why. We live in a time of connected cars, connected homes and connected health. Today, there is more than one connected device per person in the world, and by some estimates the figure will reach seven devices per person by 2020. (Cisco Internet Business Solutions Group, “The Internet of Things: How the Next Evolution of The Internet Is Changing Everything,” April 2011, estimates seven per person; AIG/CEA, 2015, estimates five per person.) Others put the number at 50 devices for a family of four by 2022, up from 10 in 2014. The insurance sector cannot stop this trend; it can only figure out how to deal with it. Moving to the concrete insurance usage of connected devices, the common perception of UBI is not positive at all. This is the current mood after years of exploring the usage of dongles within customer acquisition use cases, where the customer installs a piece of hardware in the car for a few months and the insurer proposes a discount based on the analysis of trips. This partially (only for a few months) connected car approach is based on the usage of data to identify good drivers, with the aim of keeping them as clients through a competitive price offer. In 2015, around 3.3 million cars in the U.S. sent in data to an insurance company in some way, representing less than 1.5% of the market. In contrast, another market used telematics in a completely different way—and it succeeded. Almost 20% of auto insurance policies sold and renewed in the last quarter of 2016 in Italy had a telematics device provided by an insurer based on the IVASS data. The European Connected Insurance Observatory—the European chapter of the insurance think tank I created, consisting of more than 30 European insurers, reinsurers and tech players with an active presence in the discussion from their Italian branches—estimated that 6.3 million Italian customers had a telematics policy at the end of 2016. Some insurers in this market were able to use the telematics data to create value and share it with customers. The most successful product with the largest traction is based on three elements:

• A hardware device provided by the insurer with auto liability coverage, self-installed by the customer on the battery under the car’s hood.
• A 20% upfront flat discount on annual auto liability premium.
• A suite of services that goes beyond support in the case of a crash to many other different use cases—stolen vehicle recovery, car finder, weather alerts—with a service fee around €50 charged to the customer.

This approach is not introducing any usage-based insurance elements but is an approach clearly able to satisfy the most relevant needs of a customer:

• Saving money on a compulsory product. Research shows that pricing is relevant in customer choice.
• Receiving support and convenience at the moment of truth—the claims moment. Insurers are providing a better customer experience after a crash using the telematics data. Just think of how much information can be gathered directly from telematics data without having to question the client.
• Receiving services other than insurance. That’s something roughly 60% of insurance customers look forward to and value, according to Bain’s research on net promoter scores published last year.

Let’s analyze this approach from an economic perspective:

• The fee to the customer is close to the annual technology cost for the hardware and services. The €50 mentioned above represents more than 5% of the insurance premium for the risky clients paying an annual premium higher than €1,000. This cluster represents less than 5% of the Italian telematics market. The fee is more than 10% of the premium for the customers paying less than €400. This cluster represents more than 40% of the Italian telematics market.
• The product is a constant, daily presence in the car, with the driver, with no possibility of turning it off. While the product ensures support in case of a crash, it is also a tremendous deterrent for anyone tempted to make a fraudulent claim, as well as for drivers engaging in risky behavior otherwise hidden from the insurer.
• The telematics portfolio has shown on average 20% lower claims frequency on a risk-adjusted basis than the non-telematics portfolio, based on the analysis done by the Italian Association of Insurers.
• Insurer best practices have achieved additional savings on the average cost of claims by introducing a claims management approach as soon as a crash happens and by using the objective reconstruction of the crash dynamic to support the claim handler’s decisions.
• A suite of telematics services is delivered to the customer, along with a 25% upfront discount on the auto liability premium.

So, best practices allowed carriers to maximize return on investment in telematics technology by using the same data coming from the black box to activate three different value creation levers: value-added services paid for by the customer, risk selection and loss control. The value created was shared with the customer through the upfront discount. The successful players obtained a telematics penetration larger than 20% and experienced continuous growth of their telematics portfolios. See also: Telematics: Moving Out of the Dark Ages?   These insurers were able to orchestrate an ecosystem of partners to deliver a “customer-centric” auto insurance value proposition, satisfying the three main needs of customers—or at least those of “good” customers. Compared with many approaches currently being experimented with in different business lines around the world, where the insurance value proposition is simply enlarged by adding some services, this insurtech approach is also leveraging the insurers’ unique competitive advantage—the insurance technical P&L—to create a virtuous value-sharing mechanism based on the telematics data. The story of the Italian auto telematics market shows how insurtech adoption will make the insurance sector stronger and better able to achieve its strategic goals: to protect the ways in which people live and organizations work This article originally appeared on Carrier Management.

At SpatialKey, we’ve identified a few key doubts (or apprehensions) that seem to be holding some insurers back from embracing the true value of insurtech. The term “insurtech” gets thrown around a lot, and with all the hype it becomes easy to start tuning it out and diluting its value. So what does “insurtech” really mean? I view insurtech as a collaborative movement where insurers and technologists partner to solve insurance-specific problems. Through this collaboration, insurers are able to reap the benefits of digital evolution and transformation (e.g. increased underwriting profitability, reduced claims costs, improved operational efficiencies). From blockchain to the internet of things (IOT) and transformative business models, insurtech can touch any piece of the business. But from a SpatialKey perspective, I’m talking about insurtech in the context of advanced data and analytics. As a software provider that builds solutions specifically for insurers, Spatialkey has insurtech near and dear to its heart. We’ve been pioneering geospatial insurance analytics since 2011, and we've been collaborating with insurers and expert data providers to deliver value to the industry. We’re passionate about showing insurers what insurtech can do for them. Going beyond disruptive technology and data solutions, insurtech enables insurers to compete, innovate and realize new opportunities in an industry that is rapidly changing. Specifically, it solves some key data and analytics challenges, such as lack of value-added data, visual analytics and cross-team communication (as illustrated below). Right now, insurers are being presented with the opportunity to embrace insurtech, to grow and innovate quickly through collaborative partnerships. Insurtech partnerships represent the new path forward and are poised to change how many insurers do business. This is all positive; however, it seems as though negative misconceptions arise when insurtech gets linked to “disruption.” “Disruption” is just an acknowledgement that technology is changing the industry. But because disruption carries a negative connotation, insurtech sometimes doesn’t get the positive vibes it deserves. See also: Insurtechs Are Pushing for Transparency   Maybe you're still on the fence thinking, “I’m not sure insurtech is worth it” — worth the change, the hassle, the investment, whatever. Let’s address these doubts head-on and debunk some common insurtech misconceptions that could be holding you back: Misconception 1: Insurtech is a bunch of hype. Reality: Judging by the investment landscape alone, I feel confident that this movement has gone past hype. Investment is happening by investors outside of insurance. Seeing VC firms such as General Catalyst, with interests that are typically outside of insurance, step up to invest in insurtech is a sign that this movement has traction. From 2011 to 2017, VC funding for insurtech companies grew 31%. Between Series B and Series D funding, $2 to $3 billion is being directed to insurtechs annually. And, as of April 2017, Venture Scanner is tracking 1,185 insurance technology companies in 14 categories across 60 countries, with a total of $17.8 billion in funding. Investors clearly see the value of insurtech as a catalyst to change how customers interact with insurance; a way to understand troves of data streaming in from important new sources like IOT, catastrophe data and more. Consumers expect real-time claims and smart driving apps, smart home devices and even rewards for wearables. Why, then, should insurers themselves expect less from technology? It makes sense that what technology can do for their customers, insurtech can do for them. And, with the global insurance technology spend expected to reach $185 billion this year, it’s becoming evident that insurers themselves are actively pursuing investments in insurtech. Some large insurers and reinsurers are even creating units focused on identifying new investment opportunities to drive innovation to the benefit of the industry. Some also serve as incubators to get new companies off the ground. As Stephen O’Hearn, global insurance leader at PwC, stated, “Insurtech will be a game changer for those who choose to embrace it.” Insurtech isn’t just hype, it’s happening, and “good enough” is no longer, well, good enough. Whether you’re in underwriting, claims, exposure management — or you’re a CIO — insurtech will have an impact on you. Misconception 2: Implementing insurtech is too costly. Reality: Cloud technology has made the implementation and maintenance affordable and has reduced (or eliminated) the need for IT support. Insurers face so many challenges that it can be difficult to dedicate resources to insurtech. The business case for “good enough” can appear stronger than the case for change; change comes with preconceived resource and cost notions. But, by not embracing change, insurers are stuck in limbo — with “good enough” legacy systems and practices that limit growth. In fact, in one survey, 81% of participants admitted their existing IT systems hinder innovation. Put simply, there’s a significant cost to inaction — to your ability to compete, to retain and attract new customers and to make better risk decisions. Furthermore, all of this could test the long-term relevance of your business. While there’s a cost to inaction, there’s also the significant opportunity for cost reduction. A 2017 Accenture report, “The Cloud as Rainmaker,” states, “Without cloud’s capacity and firepower, digital does not happen. Nor does an 80% cost savings.” The fact is, SaaS-based software via the Cloud has made implementation and maintenance a mole hill instead of a mountain (see illustration below). With SpatialKey, for example, there’s no need for IT support. Insurers can be up and running on an intuitive platform — gleaning deeper analytic insights with good data literally in hours. Misconception 3: In this soft market, my bottom line is under siege, and realizing the upside of insurtech is long-term. Reality: Insurers are, in fact, reaping the rewards of better analytics. Positive impacts of better risk decisions can be felt in the short term. A 2016 report from McKinsey & Company noted high-performing organizations were nearly twice as likely than their lower-performing peers to make advanced data and analytics accessible across their organizations. And high-performing organizations were twice as likely to employ self-serve analytics for their business users. Furthermore, in a survey by West Monroe Partners, “Data Driven Insurance: Harness Disruption and Lead the Way,” 57% of insurers said they somewhat or strongly agree that their companies are fully realizing the benefits of advanced analytics. The most commonly cited benefits were increased customer experience (27%), reduced claims costs (21%) and increased sales (14%). Harnessing the power of insurtech to aggregate data and improve analytic insights creates the potential for a healthier, more profitable book and competitive advantage. We’ve seen this with our own clients who have been able to more accurately assess risk in order to comfortably underwrite opportunities they otherwise may have passed on. For more on this topic, watch SpatialKey’s joint presentation with RLI Insurance from this year’s RAA event: “Accelerating Quality Decisions with the Right Info, Right Now.” See also: 5 Insurtech Trends for the Rest of 2017   Bottom line, all of these concerns are legitimate, and insurers are absolutely justified in questioning the value of something that has an impact on how they do business. The point of addressing these misconceptions is to prove that insurtech isn’t just buzz, it’s happening — it’s been happening — and it’s undoubtedly critical to staying competitive, relevant and profitable going forward. But, in order to see any of these gains, insurtech must be viewed as a collaborative movement that helps us all win and moves the entire industry forward. And by “all,” that means commercial providers, too. At SpatialKey, we know we can’t preach collaboration and not take a dose of our own medicine. It’s hypocritical to ask insurers to transform if, as solutions providers, we aren’t willing to do the same. Being a technology provider does not make SpatialKey immune from the need to digitally evolve; if anything, it’s infinitely more necessary that we always look to innovate. Our path is the same: collaboration. Collaborating with other experts — from technology to data providers — only makes us stronger. But, right now, there is unrealized potential to move the industry forward and deliver better, faster value to the industry as a whole. As solutions providers, we, too, can do more, simply by embracing collaboration among each other. To find out how collaboration leads to innovation, download: Mastering InsurTech with Smarter Collaboration. 

This is an open letter to everyone writing about “disrupters” and the insurance “customer experience,” citing “industry experts” and “top insurance executives”: For the love of God, please, please, PLEASE stop comparing buying insurance to buying a consumer product on Amazon! Case in point — from an “industry expert”:

“What’s holding most insurers back from meeting the speed and performance of a customer experience leader like Amazon? In a nutshell, siloed legacy systems.”

No, siloed legacy systems are NOT the reasons why the insurance industry doesn’t meet the “customer experience” speed and performance of Amazon. The reason the insurance industry doesn’t meet the “customer experience” provided by Amazon is because WE DON’T SELL WHAT AMAZON SELLS! Amazon sells consumer products. Insurance is not a product. If you’re compelled to label insurance, it's a process, not a product. See also: Insurance Coverage Porn   Another case in point from a recent Reuters article that quoted Ajit Jain, Berkshire Hathaway's “top insurance executive”:

"Amazon.com can deliver something to you in four hours. If people can buy paper towels on the internet, why not insurance?"

Sorry, sir, but buying insurance is NOT the same as buying paper towels. Yes, technology can — and should — be used to improve the effectiveness and efficiency of the insurance process, but phone apps and big data are not going to make a silk purse out of a sow’s ear. (BTW, there are some great silk purse bargains on Amazon right now if you hurry, and the good news is that choosing the wrong one likely won’t bankrupt you, as can happen if you choose the wrong insurance “product.”) Not every buying transaction can or should be reduced to an Amazon-like “1-click” purchase. If I want to buy paper towels, does Amazon need to ask me to explain what I’m going to use them for? Or who is going to use them? Or where I’m going to use them? Or…? The insurance PROCESS starts with assisting individuals, families and organizations in identifying their many — and often unique — exposures to financial loss. That information is then used to determine what is the best combination of insurance policy forms and risk management techniques to minimize the likelihood of a serious or even catastrophic financial loss. And if there is a loss occurrence, the process continues in both a financial and emotional way. “Insurance” is not a commodity product. It’s a regulated, service-oriented process where the “product,” if you will, is a complex, detailed legal contract that is highly litigated. To compare it to paper towels or any other online consumer purchase is infantile. How many bad Amazon purchasing decisions can lead you to financial ruin? See also: Innovation: ‘Where Do We Start?’   Why do we listen to and enable people who lack historical perspective and clearly are fundamentally clueless about how the insurance industry works and why it works that way, who really don't understand the overriding mission of this industry? Technology is a tool and a means to an end, the “end” being protecting individuals, families and organizations from financial catastrophe. Unless it’s the product “disrupters” and consultants are selling... then it's the end in and of itself. Caveat emptor.

Spies and “bugs” have made frequent appearances in movies, books and television. In the James Bond movie series, we see an array of devices that were designed for 007 by “Q.” In the 1997 movie, Tomorrow Never Dies, Bond’s BMW car and mobile phone provide the first glimpses of the potential of the Internet of Things (IoT). He remotely starts and drives the vehicle to escape the villains, while operating a number of built-in devices from the phone as the car views and senses issues. Q was always on the leading edge of new technology for Bond. Fast forward 20 years, and we now have sensors and capabilities in so many things … in our appliances, automobiles, mobile phones and a host of common wearables. You may not think of these as "bugs," but they are. They are mini- and micro-technology components employed to see, listen, learn, assess and respond. The only difference between today’s sensors and yesterday’s is that today’s sensors are infinitely better at reading and recording data — and they may be used for the common good. To prove that they are still considered “bugs,” however, you only need to look at a bill introduced recently by U.S. Sens. Mark Warner (VA) and Cory Gardner (CO). The Internet of Things Cyber Security Improvement Act is aimed to protect the federal government from cyber intrusion through the Internet of Things. Their bill raises a great point — sensors need built-in security measures that will allow for the good features to be used without introducing new risks. See also: Insurance and the Internet of Things   Good Bugs Eat Risk In the insurance industry, we understand the implications of sensors and their ability to lower risk. “Bugs” and sensors are now our best friends. In our Future Trends 2017: The Shift Gains Momentum report, we examined how IoT experimentation and implementation is reaching into every area of insurance. Here is a short list of innovative ideas introduced by early adopters of IoT in insurance:

• Progressive, via the Snapshot usage-based-insurance telematics offering, monitored how customers drove using an OBD plug-in device from Zubie.
• Liberty Mutual partnered with Google to use NEST connected smoke alarms in the home to help customers reduce fire risk and carbon monoxide poisoning while also reducing their homeowners insurance premium.
• Beam Dental began pricing dental insurance based on smart toothbrush usage data.
• John Hancock used wearable devices to track the well-being of customers, lowering life insurance premiums and offering an incentive program through Vitality to shop for an array of things.
• Oscar, a health insurance startup, used wearable fitness trackers and a mobile app to help track and encourage members to be fit, find doctors, access health history, access the doctor on call and connect to Apple Health.

In addition to the last two examples above, companies are using wearable devices and the data generated from them to better assess individuals for healthcare, life insurance, workers compensation and investment rewards based on their activity and lifestyle. Innovative insurers are using wearables to provide improved underwriting discounts, rewards, claims monitoring and new services using real-time data. The new services can include advice on healthy living, real-time healthcare and prevention, real-time monitoring and assistance in treatment or recovery plans and determining return to work timeframes for injuries or other health-related incidents. These all contribute to enhanced customer experiences, longer customer lives and improved insurer investment options. There’s No Limit to Sensor Growth This rapid experimentation and use of IoT isn’t just limited to wearables, telematics and smoke detectors. Sensors of all kinds are being born into healthcare environments, construction sites, commercial buildings, roads and bridges, homes and cars.

• By 2025, the Internet of Things will be worth trillions annually.
• Connected homes will grow rapidly by 30% per year in the U.S. alone, where 22% of households now have at least one connected device.
• The wearable device market is expected to more than double over the next five years.

Sensors Should Reduce Claims With the proliferation of companies innovating and taking new offerings to market using IoT, we are seeing the beginning of a huge boom in insurers using IoT to drive an engaging customer experience through personalized insurance offerings, reduced costs and new value-added services. The Boston Consulting Group estimated that U.S. insurers could reduce annual claims by 40% to 60% with real-time IoT. The key is that insurers will be able to move from paying claims to mitigating or eliminating risk by engaging with customers via IoT devices while also enhancing the customer experience. What’s Next for the IoT? Better bugs? Though so much remains uncertain and untested, we should expect to see a rapid evolution of technologies to sort out which sensors are most valuable in which locations and just how IoT can bring cost-effective monitoring to market. For example, P&C insurers were quick to pick up on OBD technology, with installed devices in vehicles. In many cases, mobile phone monitoring soon became a more cost-effective solution. Most smart phones have GPS capability and an accelerometer. And now automotive manufacturers are embedding sensors and telematics in vehicles to enhance safety and position themselves toward autonomous driving vehicles – just like Bond. As some wearable technologies are dropping out of the running, life and health insurers will soon be taking advantage of advancements in smart watch design. The first wave of wearables looked like digital tech devices with touchscreens and LED displays. The next wave is the introduction of smart tech into “normal”-looking watches from standard manufacturers like Movado, Tag Heuer, Fossil and Tommy Hilfiger. Android Wear technology will be feeding the data. These would be much more like Q would have designed, and they will undoubtedly be worn by many who wouldn’t normally use an Apple Watch or a FitBit. A similar technology wave is beginning to hit homes. Currently, sensors are in use in some thermostats, appliances, lighting systems, security systems, computer and gaming devices. But one of the drawbacks to having so many sensors is that most companies haven’t networked all of them to a single IoT data framework. This hinders the ability to aggregate the data across sensors, limiting the potential value. Every new data point requires a new type of sensor. As with OBD devices, attaching a sensor to everything may even become non-essential, in favor of one centrally located device with multiple sensors. PhD students at Carnegie Mellon University have been developing a plug-in sensor package they call a “Synthetic Sensor.” Plug it into an outlet, and that room is immediately a smart room. Instead of a smart sensor on every item in the room, multiple sensors in the device track many items, people and safety concerns at once. The device can detect if anything seems to be “wrong” when appliances are in use by analyzing machine vibrations. And, of course, it can track usage patterns. The sensor can even track things insurers may not need to know, like how many paper towels are still left on a roll. See also: How the ‘Internet of Things’ Affects Strategic Planning   So, would P&C insurers like to be connected to the water heater thermometer, or have access to a device that can hear pops and leaks? Would L&A insurers like to know the lifestyle and behaviors of their customers to encourage healthy living?  Much of this will be sorted out in the coming years. What doesn’t need to be sorted out is that insurers will want access to device data – and they will pay for it. They will need to be running systems that will readily hold the data, analyze it and use it effectively. Cloud storage of device data and even cloud analytics will play a tremendous role in giving value to IoT data streams. IoT advancements are exciting! They hold promise for insurers, and they certainly will make many of our environments safer and smarter.