The average U.S. consumer spends five hours a day on mobile devices. Two of those hours are spent consuming social media. Advertising on these channels is a highly effective yet often underused way for companies to engage consumers and grow their business. However, taking a “spray-and-pray” approach — blasting your message out to everyone and hoping it will reach someone likely to respond — no longer cuts it. Today’s digital consumers expect the companies they do business with to anticipate their needs and deliver highly relevant and personalized experiences. That’s where data comes in. Every time a consumer takes an action — a page visit, click, like, comment, share, post — he or she leaves a data trail. Following that trail tells a rich story about the consumer and his or her path to purchase. Below are three ways to activate that data trail to optimize your mobile and social media advertising. 1. Develop personas. Personas, or detailed representations of audience segments, are much more effective than broad demographic descriptors because they humanize target audiences. Fueled by data-driven research that maps out the who behind buying decisions, customer personas can help inform everything from marketing messages to product development efforts. For insurance and financial services companies, a great way to start developing personas is by analyzing data around life events. We know consumers make insurance purchases during major life events, such as buying a home or car, getting married or having a child. Beyond reaching the right consumer with the right message at the right time, life-event marketing puts it in the right context. Understanding the context of a consumer’s behavior is incredibly valuable and can help you adjust your marketing message to inspire action. See also: Data Opportunities in Underwriting   Social media provides marketers access to global conversations, bringing together droves of data to better understand consumer behavior, trends and opinions. And the more a brand advertises on mobile and social media, the more data it has access to and the more it can test and refine its personas to achieve even better results in the future. 2. Track the entire conversion journey. In today’s multi-channel world, data on cross-channel behaviors allows you to track a customer’s entire journey to conversion. As that journey increasingly involves multiple devices, browsers and mobile apps, it cannot be accurately measured using only cookies. While cookies may provide insight into the last touchpoint before the conversion, a cookies-only approach overlooks what happens earlier in the customer journey. A recent study by Facebook and Datalicious found marketers who only measure campaign success via cookies overlook nearly 40% of all digital touchpoints in the customer journey to conversion. And because people use multiple devices, each person has an average of three unique cookie identifiers. In other words, one individual is seen as three different people through the lens of cookie-only measurement. Because only one of those cookie identifiers will actually convert (and the other two appear to go cold), the data on engagement with your content becomes skewed. According to a Facebook IQ article, cookies force marketers to rely on guesswork to justify media investment, leading to wasted ad dollars: “So how do we tackle this complex reality? By understanding consumers as people rather than cookies…. To help drive results and sustainable business growth, more accurate methods based on people insights can give marketers the ability to measure campaigns on and off Facebook, on both desktop and mobile devices. When looking at attribution and reach, this approach offers a more holistic look at the ad performance — something not possible before.” Implementing Facebook Pixels to track conversions across devices is a great way to start building a cross-channel, people-based campaign measurement model. 3. Find the right partners. One way to greatly enhance the value of your own consumer engagement data is to combine it with complementary datasets. The easiest way to do that is to partner with organizations that have access to large amounts of data. Denim, for example, has aggregated more than 1 billion data points on consumer engagement with mobile and social media ads powered for insurance and financial services companies. We’re proud to have more data on consumer engagement with insurance- and financial services-related mobile and social media ads than anyone. See also: 4 Benefits From Data Centralization   At the same time, we recognize Denim’s dataset is not the only dataset the industry will ever need, nor is anyone else’s dataset the only dataset the industry will ever need. Denim’s database is a contributory database. In other words, it’s the contribution of Denim’s data along with a variety of other datasets that will ultimately paint a vivid picture of today’s consumer market and target it in a way that’s never been done before. Denim has partnered with a variety of organizations, including a global actuarial consulting firm, to perform extensive analyses of Denim’s data in contribution with other datasets. The results will be used to help our customers make even smarter mobile and social media marketing decisions in the future. Watch for exciting announcements to come!

These regional profiles are taken from our inaugural Insurance Nexus Global Trend Map, an in-depth quantitative-qualitative account of insurance and insurtech trends the world over. (You can access all seven of our regional profiles straight away by downloading the full Trend Map here.) Our Europe profile combines quantitative insights derived from our global survey, some of which we covered in our previous post introducing our regional profiles, and qualitative perspectives from our two in-region commentators:

• Switzerland-based venture capitalist Spiros Margaris (InsureScan.net, moneymeets and kapilendo)
• Charlotte Halkett, former general manager of communications at U.K.-based telematics provider Insure The Box (now MD of Buzzvault at Buzzmove)

First, a quick overview of the salient stats from our survey, as they manifested themselves in Europe.. Key Stats: a Quick Recap --- i) The External Challenges: Europe In Europe, the top three external challenges facing the insurance industry as a whole follow the global trend we outlined in our earlier post on industry challenges: technological advancement, changing customer expectations and digital channel capabilities. Looking further down the table, some points of note are the higher position attained by increased regulation and the lower positions of new emerging risks and catastrophe risk. Compared with some of the other regions we examine, like Africa and Asia-Pacific, Europe is relatively sheltered from natural catastrophes and the associated risks that they bring, which possibly explains the lower scores we find for new emerging risks and catastrophe risk. --- ii) The Internal Challenges: Europe Internally, the top challenges are close to the global trend we outlined in our earlier post on industry challenges: Lack of innovation capabilities and legacy systems take first and second place, with siloed operations edging out finding and hiring talent for third place. --- iii) Insurer Priorities: Europe Our discussion on Europe falls into five broad chapters, the first two of which we cover in today's post:

1. Growth opportunities in a relatively saturated market
2. The European consumer and Europe’s early adopter status
3. How European insurers can deliver on their customer promise with new tech
4. Dynamic, real-time insurance and IoT
5. Progress on developing connected insurance models across the continent

Chapters 3-5 of our Europe profile will be presented in our next post. See also: 10 Insurtechs for Dramatic Cost Savings   1. Old Problems — New Solutions While Europe, with a population of 750 million people, is a larger market than North America, it is still less than a fifth of the size of what we estimate for our Asia-Pacific region (4 billion). We therefore expect Europe to be relatively well-aligned with North America in terms of the range of market opportunities on offer. That said, Europe does comprise a broader spectrum than North America, including some of the world’s leading economies (U.K., Germany, France) alongside more emerging markets (like much of the former Soviet bloc), which are not as advanced per se but offer attractive growth opportunities. As is the case globally, low interest rates are hurting insurers’ investment outlook and forcing them to refocus on their core underwriting business. In Europe, this situation is compounded by a stringent regulatory environment (Solvency II), which makes running a profitable investments business harder still. "Solvency II regulation is good, but in the kind of environment where we have low interest rates, it makes it much harder for insurers to find opportunities to make money," comments Swiss-based VC Spiros Margaris. This is borne out in the survey stats we gathered on regulation, which we presented in our earlier post on regulation:

• Among our key regions, Europe leads on regulation as a priority area
• In our regulation section, a relatively high proportion of European respondents indicated that regulation was impeding progress at their organizations "a lot," with Solvency II and the Insurance Distribution Directive (IDD) being identified by European respondents as cause for concern
• Also, consistent with our other regions, a large majority of European respondents believed regulation was posing more of a challenge to their organizations currently than during the previous 12 months

"European carriers have a raft of incoming regulation to implement and prepare for… In addition to the implementation of Solvency II, we can also point to the IAIS’s Insurance Capital Standard (ICS) slated for 2020, the introduction of International Financial Reporting Standards (IFRS) and the transposition into national law of the Insurance Distribution Directive (IDD) in time for 2018." — James Vincent, general manager at Insurance Nexus

Interest rates and regulation make it imperative for insurers to seek growth and profit opportunities elsewhere. And while there does exist a low-end market opportunity in Europe, this is nowhere near on the scale we see in Asia-Pacific, Africa and LatAm. This means that, in the main, insurers must focus on established demographics and look either for entirely new risk categories or for ways to serve their clients’ existing risks better and more extensively. A key emerging risk area on the commercial side is cybersecurity. This isn’t entirely new as a risk category but looms larger and larger for any company operating with customer data (i.e. every company). Unfortunately, cyber risk is not an easy category of risk to insure, given the wide range of dependencies involved, spanning everything from reputational damage to share-price hits. It is partly for these reasons, Margaris says, that many insurers have been reluctant to jump on the cyber bandwagon, at least for now. Cybersecurity is also an issue that insurers are on the receiving end of, insofar as they steward vast quantities of customer data, all of which must be secured. Consistent with our other regions, a majority of European (re)insurers are very concerned about information security breaches, as we saw in our earlier post on cybersecurity; fortunately, a majority also have mitigation plans and have adjusted their security strategy to reflect the rise of new digital platforms. Beyond exploring completely new risk categories, like cybersecurity, insurers in Europe will find fresh profits by focusing on what they have always done – only better. Retention of existing business is therefore of primary importance, and we did indeed find a high focus on customer loyalty among European insurers in our post on marketing and customerCcentricity. Part of this also involves increasing the lifetime value of customers already on the books, with around half of European respondents indicating that they have a strategy to bundle and upsell products based on customer lifestyle analytics, consistent with our other regions, as we recounted in our section on product development.

"There is an abundance of capital available in the global economy, and right now money is cheap. There is minimal value in continually driving down price and adding further competition to a saturated market place. Putting digital at the core of distribution strategies will allow previously untapped markets to be exploited for a relatively low cost, allowing that capital to be deployed more effectively." — Gareth Eggle, head of insurance at Flint Hyde

Additionally, though, growth for European insurers will come from going after new customers in the established demographics, and this will require carriers to better adapt their existing products to the sorts of risks people want to insure against and to offer them at an appropriate price. While this new drive toward customer-centricity will, generally speaking, result in lower premiums (insurance is not a designer item, and less is always more from a price perspective), it also allows greater scale and, ultimately, lower operating costs. If we take the U.K. motor-insurance market as an example, we see that there is plenty of old business to be better served and new business to be won. Charlotte Halkett, speaking from her experience as general manager at telematics provider Insure The Box (Charlotte is now MD of home-line Insurtech Buzzmove), mentions that the cost of motoring in the U.K. is a particular challenge and draws attention to unlimited liability as well as to various government-influenced changes, such as the Odgen Rate, which disproportionately affects younger drivers less-well-placed to front the cost of auto insurance. It is this opportunity – not just to improve driver safety but to bring down the cost of motoring – that Insure The Box is taking full advantage of. By monitoring driver behavior through telematics, the company is able to encourage safer driving behaviors and ultimately guide motorists to lower premiums. We will explore their usage-based insurance (UBI) model in our next post. While Insure The Box forms part of an incumbent insurer’s technology stack through its parent company Aioi Nissay Dowa Insurance Europe, it is unlikely that the new play for personalized, customer-centric insurance will work out solely for the benefit of incumbents. Indeed, the opportunity is already attracting many new market entrants (like insurtechs), which represent a serious threat to legacy insurers’ hitherto cozy models. Margaris gives a high-level explanation as to why insurtechs are such a threat to traditional players: "Consumers will ask themselves why is it so much cheaper with an insurtech company and why does it cost so much at the insurer’s end? So there will increasingly be a margin pressure. The example I often present: If somebody gives the milk away for free, will you go to the deli and pay $1? You’ll say, I get it free there. I want to stay with you, but I’m not going to pay you a dollar for it. And that’s what fintech/insurtech does, it piles on margin pressure." Even if insurers can get the price of their products down, Margaris still believes insurtechs have an edge due to their stronger customer credentials. "If insurtech companies provide solutions that feel very personalized, customized to the user’s needs, people will feel like what their insurance company is offering is so old-fashioned," he says. "So there will be dissatisfaction with the incumbent services that they’re getting, and of course pressure not to pay up for that." Much of the difference between old-fashioned and newfangled comes down to the user interface. In this regard, Margaris compares the old and the new in insurance with the old and the new in software: "If we go back 15 years and look at the user experience with software then – nowadays, you’re left asking, how did people use it? But at that point we thought it was cutting-edge. Now, though, people don’t want to think about what they’ve got to do, everything has to be seamless." Price and personalization (the two Ps) are the two key areas that insurers have to work on as they square up to new market entrants. We will see later on in our Europe profile that insurers’ ability to lower premium prices in fact goes hand in hand with improving personalization – in the sense that more frequent customer touchpoints and interactions provide the very data insurers need to price accurately and to offer the incentive of lower prices still.

"Anyone who believes that business will stay as in the past, will face a so-called 'Kodak' moment and will not survive increasing competition. There is an urgent need to systematically deal with innovation and challenge the current offering or even business model." — Monika Schulze, global head of marketing at Zurich Insurance

2. Europe as Early Adopter The trends we have just outlined – falling investment returns and a renewed drive toward customer-centricity – all manifest themselves, in some way or another, in the other markets we examine. But how does Europe compare with other markets? Throughout this report, we have characterized the current disruption sweeping through the insurance industry as being customer-driven. We further identified its roots in the growth of digital outreach and distribution channels, not just in insurance but in the online economy more generally (a case in point being online retail), in the sense that these open up formerly captive markets to fleet-footed digital competitors.

"From IoT in the field to analytics and emerging AI solutions at the back end, European carriers are grasping with both hands everything the technology community has to offer in their bid to win the race for the customer. This promises to be a very exciting period for solution providers!" — Guy Kynaston, commercial director at Insurance Nexus

Europe is not just a heavily disrupted market but one in which insurers are showing themselves relatively well-equipped to deal with this, compared with our other key regions (this comes, of course, with the caveat that the European market varies substantially from country to country in ways we can only explore here at a relatively high level!). In our post on marketing and customer-centricity, we characterized Europe and Asia-Pacific as exhibiting a marginally more problematic insurer-customer relationship than North America. In Europe’s case, we pointed to the high priority score that it achieved for customer-centricity (56 compared with North America’s 51). Our thesis was that higher customer expectations in the region were driving customer-centricity to the very top of the European priority rankings. In line with our view that changes to distribution are intimately tied up with disruption in insurance, we expected to find a relatively shaken-up distribution landscape in Europe. A few thoughts on this:

• The digital direct-to-customer channel is well-established in Europe (as we saw in our post on distribution, if any region is a laggard, it is North America)
• Affiliate partnerships have a long tradition in Europe, for instance with Tesco insurance in the U.K., and a majority are increasing their distribution through these channels
• We know anecdotally that aggregator impact is high in Europe, likely a consequence of the volume of direct business and the plethora of digital channels

While distribution disruption is what fundamentally enables customer disruption, these two trends are ultimately bound together with consumers, once empowered, setting ever higher precedents for distribution. Halkett gives a brief overview, from a U.K. perspective, of this consumer/distribution complex: "The U.K. consumer is a very early adopter of things like online retail purchasing, and that means that new entrants can get to their market much more easily than in other markets." She continues: "The U.K. insurance market has been the most innovative for many years. They were the first to have direct insurance and the first to then start widescale adoption of aggregators, and now insurtech leads in the U.K., as well." Aggregators, in particular, allow new entrants to get in front of a vast number of consumers with minimal upfront cost. Halkett recalls how it was the aggregator route that first brought her former employer, startup Insure The Box, to prominence: "We started with almost no brand, no marketing spend, we got onto our first aggregator and that meant that lots of consumers could see our proposition very, very quickly. That’s how you find those early adopters, and that’s how the ball starts rolling. The U.K. consumers are very willing to try different financial products this way." Aggregators are particularly well-established in the motor-insurance sector, and Halkett estimates that the percentage of U.K. customers that use an aggregator before taking out a policy is in the 80% range and that this rises into the high nineties for young drivers. Based on the two lines of inquiry we have pursued in this chapter on "Europe as an early adopter" (high customer priority and a wide-open distribution landscape), we conclude that disruption has definitely arrived in Europe, and that the European market may be marginally ahead of the North American market. We feel similarly about Asia-Pacific, although it appears that the disruption wave is only just breaking over this market. On the other hand, it is our conviction that European (re)insurers have already gone some way toward establishing a new normal and are relatively well-equipped to deal with disruption. One key measure that speaks for this is the fact that it is Asia-Pacific, not Europe, that trails on cross-channel consistency. If Europe is marginally ahead here, this would suggest that European insurers’ omnichannel strategies – a reaction to disruption – have gone some way toward flattening out the fractured distribution landscape. Similarly, we can point to the lower prominence, compared with Asia-Pacific, of the chief customer officer role in Europe among recent or imminent appointments. The lower importance of the chief customer officer appears at first glance hard to square with the high priority that Europe currently accords to customer-centricity. However, rather than chief customer officer and other customer-related job roles being unimportant in Europe, we might conclude instead that they are simply not of recent creation. In Asia-Pacific, by comparison, which we have suggested is only now feeling the full force of customer-driven change, chief customer officer is the stand-out new job title. See also: Global Trend Map No. 9: Distribution   Intuitively, we expect job roles to get created when the perception of a market threat is at its highest, in some sense as a knee-jerk reaction. If we infer from our job-role stats that chief customer officer is currently all the rage in Asia-Pacific but was last year’s role in Europe, the implication is that the wave currently breaking over Asia-Pacific broke over Europe a short time ago and that Europe is marginally further along with its journey toward tomorrow’s new normal. The key stat to bear in mind here is the disruption score relating to lost market share that we introduced in our insurtech perspectives section: Only a small minority of carriers in Europe (23%) reported that they are currently losing market share to new entrants. We already emphasized the psychological component of this score in our insurtech perspectives post, so – at least in terms of how European (re)insurers perceive their own market – Europe is in less deep trouble than Asia-Pacific, where 47% of (re)insurers believed they were losing market share. "I think European insurers are not panicked yet that the insurtech companies will destroy their business," Margaris says. "We haven’t seen much business deterioration through insurtech companies yet, but it will happen, that’s certain." It would therefore appear that Europe is not so much the most disrupted of our key regions as the longest-disrupted. In line with this reasoning, it is Asia-Pacific that could be termed the most disrupted, in the sense that it is being hit by a storm that Europe has entered already, and North America the least disrupted, in the sense that the storm has not (quite!) broken yet. We explore the nature of disruption in the APAC and North American markets in greater detail in our coming dedicated profiles on these regions. None of this is to imply that the material level of disruption in Europe is declining or that the storm has been ridden – far from it – just that insurers have gone further to take it on board. Indeed, as Margaris has pointed out, more business deterioration is likely on its way. There is also no reason for markets to develop in a linear fashion, with innovations (and threats) arriving onto the market in a constant stream, so relative confidence among insurers today could turn into (or back into) panic pretty much overnight. For the time being, though, we believe we have discerned a slight innovation lead in Europe, which we explore further in our next post, in which we cover off the remaining chapters in our Europe profile:

• How European insurers can deliver on their customer promise with new tech
• Dynamic, real-time insurance and IoT
• Progress on developing connected insurance models across the continent

 

A playbook is better than a simple plan. A plan is a road map to a desired future based on current conditions and the steps needed to go from the current state to a future state. A playbook acknowledges that there are many possible futures and that businesses need to be built in a way that will adapt and thrive in any of them. In our past three blogs (here, here and here), we’ve discussed the concept of digital playbooks. Using a variety of digital “plays,” insurers can customize their playbooks in an effort to meet future demands and opportunities with flexibility. Using both the consumer market and the SMB market as examples, we created a pregame analysis. In this blog, as we look closely at small to medium businesses, we’ll consider how the scouting report can help us build Ideal Offerings, plays that are likely to help insurers bring digital capabilities to a ready market. New SMB Behaviors and Expectations Business is changing so rapidly that it is difficult for insurers to keep up. Aside from technology changes and generational expectations, the sheer numbers and types of businesses grow daily. The vast majority of new businesses are within the small-to-medium business space — and owners determine or greatly influence purchase decisions. For that reason, Majesco’s latest SMB research accounted not only for technology needs and trends within businesses, but it also accounted for generational differences in the ownership that controls insurance decisions. We found that when it comes to experience with new technologies and trends, there is a clear, strong interaction between business owner age (generation) and the size of the company (number of employees). See also: Digital Playbooks for Insurers (Part 1)   The results of this research can be viewed in our thought-leadership report, Insights for Growth Strategies: The New SMB Insurance Customer. A quick synopsis of the areas of digital impact include:

• Gig economy shift: Across all generational distinctions, there is growth in independent contractor/freelance services.
• Apps/Connected Devices: There is strong commercial use of apps and connected devices, with the highest use occurring in companies with 10-99 employees in the Gen Z/Millennial and GenX segments.
• Digital Payment: All segments have strong use of ApplePay and Samsung Pay, except for Pre-Retirement Boomers.
• On-Demand Insurance: Commercial use of On-Demand insurance is strong, in addition to online purchasing of insurance and the use of cloud-based subscription products.
• Drones and 3D Printers: These technologies are both on the rise, indicating new areas of risk that will require new products and services. 3D Printer use is highest among Gen X/Boomer segment companies with 100-499 employees.
• Risk Prevention: SMBs are willing to look at reduced costs and prevention of risks through value-added services and even social networking.

In creating digital offerings for all SMBs, insurers can begin their brainstorming with a list of digital capabilities and context drivers that are currently relevant to potential new business models and product and service offerings. Keeping this kind of list on-hand will allow companies to add/subtract/combine elements to form new Ideal Offerings. Though any business segment could certainly be a place for a new Ideal Offering, the three company and generational segments with the highest level of interest in new offerings were:

• Gen Z and Millennials, 10-99 employees
• Gen Z and Millennials, 100-499 employees
• Gen X and Pre-Retirement Boomers, 100-499 employees

These segments share traits across many areas, including:

• Doing things that reduce risk or provide free or discounted services and products and rewards.
• Using services that prevent or minimize risk, accidents or claims.
• Using insurance to cover an event of specific duration.
• Using mobile messaging apps for quoting, policy management, bill payment, claim filing and claim payment.
• Creating new affinity relationships to get preferred pricing among social groups.
• Using activity-based pricing for employees/vehicles/equipment.

SMB Playbooks So, what does this mean to the business insurer playbooks — the ones you may be creating right now? Well, first, it means that the time is ripe for creative business model, product and service development that shifts into the realms of Digital Insurance 2.0, by re-envisioning within the context of digital possibilities and desired engagement. An organization’s digital plays must include transformations that match generational SMB expectations and needs. These sought-after attributes are redefining the insurance value chain we have known for the last 30-plus years as Insurance 1.0, and they don’t just represent simple improvements. They represent a new world of Digital Insurance 2.0. Interestingly, pre-retirement boomers are open to digital services that will save claims and improve rates, signs that they are still engaged in making their businesses profitable and competitive. For example, business owners appreciate transparency in operations. Insurers that can provide an ecosystem of sensors, monitoring and risk reduction will find that businesses are highly ready for improved data and analytics regarding their own processes and risks. Every digital risk mitigation solution removes some of the weight and worry of the unknown. These services may go beyond business insurance products. Majesco fully expects that the insurer digital playbook will rapidly be filled with these non-insurance, value-added services that may also be foundational profit centers. Mobile and messenger-based apps may soon be considered table stakes with business insurers, but Digital Insurance 2.0 capabilities within these apps will continue to grow and improve. They exist at the intersection of business desirability and the need for portable windows into operations and service. See also: Darwinian Shift to Digital Insurance 2.0   Contextual and on-demand insurance need cloud platform solutions to work. An insurer that is using cloud and AI for real-time data management and decisions, for example, will find it much easier to track and insure (and even provide preferred routing for) freight carriers, delivery services and any business that needs to move people or materials. The gig part of the gig economy also needs episodic insurance. A benefit in this area may be grouping similar businesses for improved service. All of these possibilities fit within the positive opportunities identified by our research. Insurtech companies and existing insurers are taking advantage of a new generation of buyers with new needs and expectations, capturing the opportunity to be the next market leaders in the digital age, Digital Insurance 2.0. While Insurance 1.0 is still firmly in place with the smallest businesses and Gen X and Pre-Retirement Boomer business owners, insurance companies need to adapt and innovate to compete and prepare for business shifts that are rapidly unfolding. Where is your organization on the road to Digital Insurance 2.0? To gain more insights from our SMB research, be sure to read Insights for Growth Strategies: The New SMB Insurance Customer. For an in-depth look at how Cloud technologies can place insurers on the right road to digital transformation, check out Cloud Business Platform: The Path to Digital Insurance 2.0.

Group insurance is an approximately $65 billion market. While growth has been consistent but moderate at 3.5% to 4% per year over the last six years, changes in the employee-employer dynamic are reshaping group benefit needs and making investments and growth prospects in the sector more attractive. Carriers’ initial response has been to drive profitable growth by streamlining their operating models and making incremental investments in technology to upgrade their capabilities. However, employer and employee needs and expectations continue to rise. Employers are using innovative benefit solutions to differentiate themselves when recruiting and retaining top talent. Employers recognize that employees no longer have the patience or time for benefit plans that are cumbersome to enroll in and manage. They’re looking for holistic solutions that employees themselves can direct. In addition, employees have different needs based on income diversity and – more so than in recent memory – generational circumstances. Consequently, they’re looking to employers to offer customizable solutions that help them meet their unique needs in a user-friendly fashion, 24/7. Moving forward, five trends will continue to shape the group insurance market and influence carriers to move beyond incremental investment to fundamentally reposition their business and operating models. These trends will motivate group insurers to provide more measurable value for employers, employees and intermediaries by delivering more integrated products and services and better customer experiences. We also expect to see a) More and more players in adjacent markets such as health, workforce management and wealth to expand into market niches that overlap with group insurance; and b) More venture capital to flow to insurtech solutions that meet the group space’s evolving needs. Group insurer solutions will take advantage of the convergence of health-wealth-career management Consumers are increasingly managing their health, wealth and career decisions in a coordinated way because they all affect the same wallet. Decisions about health range from ways to maintain fitness to ensure their quality of life (and thus ability earn an income) to selecting the right combination of benefit products to reduce the key risks that could knock them and their families off track for an extended period of time. As people at the higher end of the socioeconomic scale live longer and healthier lives, they’re looking to manage their personal wealth to support their and their families’ financial positions for longer periods of time. Moreover, as employers compete for top talent, they are increasingly providing benefits and programs that address the concerns their employees have about their and their families’ physical, mental and financial health. Employers are focusing on a) health and return to work programs that contribute to worker productivity and performance, and b) employee development programs. See also: How to Unlock Group Insurance Market   The confluence of these factors is creating opportunities for group insurers to provide employers with solutions that help them improve their employees’ health, wealth and professional satisfaction. Some carriers are responding by offering more holistic solutions, either by expanding their own product offerings or through partnerships with others in which they can white label products. Other carriers have decided not to expand their own product offerings, but instead focus more on the wealth/ retirement or health. In either case, they’re trying to make their products and services fit with the other benefits employers’ chosen platforms offer. Group insurers will look to serve more market segments Many group insurers have long focused on certain market segments. For example, some have been dominant in the national account or large case segments and others in the small or mid-case account segments. Each market segment requires different operating model strengths. But, as employer and employee needs increasingly change, the traditional lines between small, mid, and large account segments are starting to blur. Group carriers are now rebuilding core capabilities and introducing new ones in order to more profitably serve a broader range of employer segments. Recent M&A activity has resulted in significant new capabilities. For example, the Hartford, which acquired Aetna’s group life and disability business, and Lincoln Financial Group, which acquired Liberty Life, are examples of the priority group players are placing on adding or enhancing capabilities (such as integrated absence management) to serve broader segments of the market. These moves indicate that the carriers which traditionally have been stronger in the small and mid-markets are building new capabilities and transforming their target operating models in order to serve the unique needs of larger account segments. Moreover, large account carriers are building new capabilities and changing their target operating models in order to standardize and automate their solutions to more profitably serve smaller market segments. Group insurers will increasingly respond to increased absence management needs, even for down market clients Absence and leave management services are a core service in the disability market and demand is growing. There has been a spike in requests by employers for absence and leave services as a result of: a. The January 1, 2018 New York Paid Family Leave Law, which is the most significant paid leave program in the US; b. Recent localized laws, such as the Paid Sick Leave Ordinance (PSLO) and Paid Parental Leave Ordinance, have increased the local complexity of employer leave and absence tracking; and c. Increased cross-selling of disability, FMLA, and voluntary products makes the need for claims/absence integrated services more relevant. In response to these changes, carriers are increasingly adding absence services and platforms to their repertoire. For those familiar with disability, FMLA, and other products, absence is not new. For those who aren’t, tracking the high number of federal, state, and local laws is a tremendous value-add to their client base. In order to improve customer service, carriers are integrating claims and absence into an “event” experience to radically reduce the burden of correspondence that explains payments and absence rights. M&A activity and insurtech investment will continue to shape in the group market Moving upstream and downstream among employer segments requires new capabilities. The traditional way of doing business will not meet changing employer and employee expectations. As a result, M&A, insurtech investment, and maturing group technology solutions will continue to influence the group market in three ways: a. In addition to the M&A activity we previously noted, there have been other transactions in the group space, including Meiji’s acquisition of Stancorp and Sumitomo Life’s acquisition of Symetra. Acquisitions like these potentially provide much needed capital investment for group players looking to take advantage of the convergence in the space and the opportunity to profitably expand across traditional market segments. This in turn could raise the bar for existing players, especially in areas where they need i) broker or consultant customers to recommend their products, and ii) to address employer needs to respond the changing employer- employee dynamic. b. There also have been deals adjacent to group benefits, such as CVS’s acquisition of Aetna and the Amazon, Berkshire and JP Morgan joint venture. These developments may impact more than product solutions, pricing and omni-channel distribution and service; they also could significantly reshape the employer and employee customer experience. c. Group carriers traditionally have often been reluctant to make significant investments in technology and when they have, they’ve attempted to build new technology solutions in-house. However, with the exponential growth of insurtech and the maturation of group-focused core technology, some carriers are finding it both necessary and easier to acquire new solutions rather than build them. Consequently, group insurers are accelerating their investment in core areas, including enrollment, policy administration, and claims, thereby allowing them to improve in a number of areas from quote to close ratios, and from employee program participation to claims management. Group insurers will continue to build digital & data architecture and expand analytic capabilities Artificial intelligence, predictive analytics, behavioral economics, machine learning, robotic process automation, among other technological developments, represent opportunities for group insurers to better understand, acquire, serve and retain customers in new and more cost effective ways. Carriers are choosing to invest in new digital capabilities to improve customer and channel segmentation and experience, as well as enhance their ability to acquire and retain the right customers. This helps carriers anticipate employer needs and enables solutions to change as employers do. It also promotes better carrier understand of employees’ broader needs beyond the employer relationship. Also of note, group insurers have long had a significant amount of data and in recent years have taken advantage of advances in big data, reduced cost of computing power, and commoditized analytic techniques to increase their use of data for decision-making and insight generation. However, many of the advances in data have still not translated to improvements in employee level data across the value chain. See also: Group Insurance: On the Path to Maturity   New investments in data will help group carriers 1) Improve the data architecture that is critical to improving workflow and customer experiences, 2) Focus on employee level data to better meet the needs of employees – especially in the areas of portability, and 3) Incorporate third-party and unstructured data with employee level data, which will help them be more consultative with employers about the design of responses to employee needs. Implications

• Group insurance will be increasingly important as a business platform for addressing employee health, wealth and career needs, as well as employer needs to offer their employees differentiated solutions.
• Existing players cannot stand still because they face converging forces that are fundamentally transforming group business and operating models. Carriers that are business units of larger insurers which have underinvested in group capabilities (even if the group business unit has been consistently profitable) need to be particularly attuned to these developments.
• New group players, including those resulting from M&A, should do more than just make the mergers “look good on paper” but sincerely focus on designing new customer-centric operating models that leverage new business and technology architectures to create excellent B2B2C experiences.

This report was written by Jamie Yoder, Marie Carr, Jim Quick, Mike Mariani, and Josh Schwartz.

So, you’ve added the Net Promoter “likely to recommend” question to your customer surveys.  You’re tracking the results and reporting a Net Promoter Score (NPS) on your Executive Dashboard. Your company is “doing” Net Promoter – right? Not quite.  What your company is doing is what a lot of companies do when they jump on the Net Promoter bandwagon – they measure NPS.  But if all you’re doing is measuring NPS, then you’re not really “doing” Net Promoter. What many people don’t realize is that the actual measurement of NPS is arguably the least important component of a true Net Promoter program.  The hallmark of a robust Net Promoter implementation is what happens after the measurement is made. That’s when – in Net Promoter parlance – there’s a need to “close the loop” on the measurement. Closing the loop is about acting (not just reporting) on what you’ve learned from the Net Promoter survey. This needs to be done at an aggregate level — looking at the themes across all survey responses and translating those insights into operational improvements. But it also needs to be done on an individual level — initiating some type of follow-up contact with customers based on their survey response (for example, calling a customer who expressed dissatisfaction). See also: Where a Customer-Focused Culture Starts   Note that closing the loop isn’t just an academic exercise.  As I’ve written about in the past, your customer surveys are part of your customer experience.  The mere act of following up with survey respondents actually helps enhance their impression of your business (because it’s so rare that a company actually takes that step). As the popularity of Net Promoter has grown, the origin of the measure – and its foundational principles – often get overlooked. Fred Reichheld, the creator of NPS, drew his inspiration from Enterprise Rent-a-Car’s “Service Quality Index (ESQi).”  Interestingly, the ESQi survey questions and scale are completely different from NPS. For Reichheld, however, the real defining characteristic of ESQi was how individual Enterprise branches used the survey data to drive specific operational improvements.  There was (and remains) a strong cultural ethic at Enterprise around closing the loop following any survey exercise.  Reichheld made that discipline a cornerstone of his Net Promoter philosophy. Net Promoter is a great instrument for facilitating customer experience differentiation.  Just be sure to employ it properly – which means using NPS to manage your business, not just measure it. This article originally appeared on WatermarkRemarks.

Imagine the scene. A warm summer’s day. The tree-lined slopes of gentle hills stretch toward a darker valley below. There’s a river running through it, sparkling water, dappled light through the leaves. Now place a party of schoolboys there, shipped out from the nearby town – lucky kids from well-off families, enjoying the fun of summer camp. On the first day, they form into two teams. They’re given different huts to sleep in and different colored badges to wear. They’re encouraged to choose a name and an identity. During the coming days, they’ll compete in all sorts of games and projects. Sounds idyllic, yet, by the end of the week, there is almost open warfare between the two teams. What began with name calling and petty violence (each group burned the flag it had captured from the other team) moved on to raiding parties that attacked the opposition’s huts, overturned beds, ripped apart furnishing and stole key possessions. Before long, there was a real risk of violence. The teams armed themselves with baseball bats and socks filled with rocks and marched toward each other for a showdown when the camp counselors finally intervened! This was the famous “Robbers Cave” experiment devised by Muzafer and Carolyn Sherif to explore how inter-group conflicts occur when there are limited resources and a strong element of competition. Being in one group – in this case, you could be either in “The Rattlers” or “The Eagles” – meant that you had a great deal of loyalty toward your fellow teammates and an equal antagonism toward the others. In many ways, this mirrored work by Henri Tajfel and others around social identity theory – the idea that we define ourselves by the groups we identify with and which we try to belong to. Their famous studies gave us the idea of the “in group” (people like us) and the “out-group” (the others outside of our circle). Once again, research showed the propensity for conflict between the two groups and the lack of trust that could quickly build up – even if the basis of who’s in which group is as simple as being allocated a color or a group name. See also: Improving Your Potential for Innovation   Significantly, the same effect can be reproduced very easily with different groups and in different situations – essentially underlining an important aspect of the way we have evolved as social animals. We bond together tightly (which is good evolutionary practice when facing a common enemy). However, it has a downside, which is a tendency to distrust people belonging to groups outside our circle and the ease with which this can escalate into open hostility. What has all of this got to do with innovation? Quite a lot, actually. It helps us understand the famous “Not Invented Here” (NIH) effect. NIH is one of those surprising features of the innovation landscape – the situation where an organization rejects a new idea offered from outside. For example, the young inventor Alexander Graham Bell was looking for a partner to help him commercialize his idea for a telephone – a device which could revolutionize the communications industry. He started with the U.S. market leader, Western Union, the guys who’d spent so much time and effort stringing telegraph wires alongside railways tracks to link up the continent. It seems like a good fit from the outside. However, their reception was frosty. In a famous comment the President of Western Union, William Orton, who was known as one of the best-informed electrical experts in the country said: “There is nothing in this patent whatever, nor is there anything in the scheme itself, except as a toy. If the device has any value, the Western Union owns a prior patent … which makes the Bell device worthless.” NIH is a surprisingly common feature of the innovation landscape, and there are many other famous examples. Not least Kodak’s rejection of both Edwin Land’s idea for the Polaroid process and Chester Carlson’s xerography underline how easy it is to put up defenses against ideas originating from outside. NIH is a theme which my colleague Oana-Maria Pop has written a great blog post about, but its persistence makes it worthwhile to take another look. Elting E. Morison gives a wonderful example in his detailed study of “Gunfire at Sea,” which explores the tortuous journey the innovation of continuous-aim gunnery had in finding its way on to the decks of U.S. warships. Back in the late 19th century, naval gunnery was not very accurate. A U.S. Bureau of Ordnance study of one thousand shells fired during an exercise around the time of the Spanish-American war suggested that less than 3 percent were hitting the target. That’s a problem. A long way away in the South China Sea, Admiral Percy Scott of the British Navy was working on the solution. His squadron was doing gunnery practice with similarly poor results – except for the crews on one ship (rather inaptly named HMS Terrible) who were recording surprisingly accurate performance. Looking more closely revealed the use of a prototype gun-sight and a novel method of tracking the target called “continuous-aim gunfire.” Scott supported the development, trained all the crews on all his ships, and eventually changed practices across the British Navy. The fascinating part of the story concerns a young U.S. lieutenant, William Sims, on secondment with the squadron. He is aware of the Bureau of Ordnance study and the poor U.S. performance and sees in the new British system an opportunity to make his name and career by introducing this better system to his superiors in Washington. What follows is a classic case of NIH – all sorts of arguments assembled to prove that the new system was no better. For example, a side-by-side test was arranged on dry land where the advantages of the new system in dealing with moving targets at sea were neutralized! It took President Roosevelt intervening himself to get the U.S. Navy to take the idea seriously and eventually adopt the new system. It would be wrong to see this behavior as the result of blind stupidity or outdated attitudes. Significantly, in most NIH cases, there is a very plausible defense to be mounted – the lack of fit with the core business, the risk of having to cannibalize existing activities, the unproven nature of the new technology, etc. What’s really going on is subtler and owes a lot to the ideas introduced above around group identity and defenses. We sometimes talk about a corporate immune system, and this is a good metaphor because it accurately captures what an immune system does for our bodies: protect them against dangerous things from outside. The narratives around resistance to outside ideas – not invented here – are very much those of a well-meaning immune system. One way this hits our innovation world is when the new ideas emerge from across national borders. There is little doubt that “lean” thinking has changed the world – first through manufacturing and then across services both public and private. In its early days, lean was conflated with Japanese manufacturing techniques which had a frosty reception outside Japan – a common argument was that “it works over there, but it isn’t right for our kind of organization.” The same goes for many of the quality management principles which we now accept as second nature but once saw as something peculiar to Japanese corporate culture and not transferable. Studies in psychology have shown the close links between the ideas raised by social psychologists like Sherif and Tajfel. For example, Alex Haslam and colleagues looked at perceptions of creative ideas arising from groups. Their findings confirmed on many occasions that when those ideas came from within the group, they were highly rated and valued where those coming from another group were lacking in innovativeness or value. And a recent article by Frank Piller and David Antons distills a variety of other psychological studies, which give us a clear sense that this is not an occasional effect – it is deep-rooted. The big question for innovation management is, of course, what might we do about NIH? How can we reduce the risk that we miss out on something important from outside because the way our “immune system” operates? One useful place to start is with Sherif’s original experiments. In their later work on trying to understand inter-group conflict, they found that giving groups a superordinate goal made a difference. In other words, make the challenge big enough and everyone will co-operate, share, and work together towards the target. The “moon-shot” project is a powerful way of overcoming tribal rivalries, and it works just as well inside large organizations. See also: Linking Innovation With Strategy   Another approach is to mix people up. The more we can experience first-hand that people are like us, the harder it is to maintain inter-group boundaries and barriers. Cross-functional teams, secondment, and rotation are all helpful strategies, especially in innovation where ideas from across different functional or discipline boundaries are often powerful assets in solving the overall challenge. Interestingly, we’ve known this for a long time. Back in the 1960s, a pioneering set of experiments were carried out by Paul Lawrence and Jay Lorsch looking at innovation in textiles, plastics, and food. They found that the extent to which differences between functions was an important influence on how long it took to get new products to the marketplace. By extension, those groups with multiple integration mechanisms fared better, sharing ideas, defusing tensions, and working together towards the common goal.

As consumers, we know that digital has transformed the way we discover, engage and transact with businesses in every industry. From ordering coffee on our mobile devices to running our smart homes on voice-command, we expect all of our experiences to be fast and seamless. The insurance industry has gone through its own digital transformation over the past five years. With a general acceptance that digital is here to stay, most insurers have incorporated digital into their organizations, implementing ad hoc capabilities to make their business faster and cheaper, creating online tools to further engage their distribution channels, and implementing table stakes technology in areas such as marketing, digital portals, customer self-service capabilities, and automation of some back-end processes. As we move into 2018, digital is continuing to reshape the way insurers do business. The ecosystem of available capabilities has grown exponentially and industry leaders are starting to leave behind the “fast-follower” mentality, reallocating their investments into core capabilities that give them a more customer-centric view, as well as ways to differentiate themselves in the market. Industry leaders are starting to leave behind the “fast-follower” mentality, reallocating their investments into core capabilities that give them a more customer-centric view, as well as ways to differentiate themselves in the market. From our perspective, insurers will take one of two paths:

1. Continue as followers, investing in only select digital capabilities that support their existing business model. This is a bottom-up, project-driven approach that identifies select digital capabilities within different parts of the value chain.
2. Take a digital-first mindset by better understanding the end-to-end customer experience and how business models need to evolve in order to increase growth and reduce costs. This is a top-down organization transformation with the goal of becoming a digital and data-driven organization which can continuously reassess the business and operating model.

As the graphic opposite illustrates, taking a digital-first approach and synchronizing investments across functions and processes will promote success by enabling a digital strategy that is a “North Star” that guides continuously improvement rather than just a point in time assessment. See also: Digital Insurance 2.0: Benefits   The companies that develop a meaningful competitive advantage will design and implement digital platforms that can handle disruption and positively change cost structures. They will:

• Build scalable systems, even for niche offerings,
• Deliver an end-to-end customer experience, and
• Change their business models to foster a test and learn environment that helps them improve how they go to market. These leaders will be the most likely to quickly adjust and grow as the industry continues to become more digital.

Building a digital platform Although we tend to understand digital transformation and modernization of technology platforms as sequential, multi-year events with multi-million dollar price tags, finite delivery dates and fixed realization periods, true modernization requires a foundational shift in the organizational culture, operating model, and underlying architecture that enables business flexibility and agility. Building a digital platform that will take your company into the future — not just respond to current needs — is critical to prolonged success. Insurers are currently enabling access to data across various domains and dimensions, but the companies going the extra mile to design a futuristic platform architecture are the most likely to benefit in the long term. Future-oriented platform architectures should be able to:

• Enable more granular services,
• Provide flexibility when reacting to traditional demands and responsiveness to disruptive emerging products,
• Support business models and technology needs beyond now standard core platform capabilities (e.g., policy, billing and claims systems).
• Feature consumer-centric architecture built on the core guiding principles of atomic components and services vs. monolithic applications,
• Enable reusability across constituent groups and processes vs. process-centric solutions,
• Assemble best-of-breed technologies, capabilities, and/or service models vs. being just a broker of services.

Enabling your digital platform Gone are the days of a simple buy/build/rent conversation where companies could seek to house all capabilities within their own walls. Now, everything from insurtech incubators to white-labelled products are revolutionizing the way insurance is bought and sold. The rise of flexible, digital B2B2C platforms is giving rise to faster, better, and previously unconsidered partnerships across the insurance and retirement spectrum. Industry leaders are identifying how they can extract value from partnerships in all areas of their organization, whether by providing newer customer engagement models, adding revenue streams, or reducing cost structures, all while building digital ecosystems that can easily integrate with these strategic partners. These partnerships are enabling companies to respond more nimbly to changes in market trends, consumer expectations and nascent technology, creating frictionless capital flows across the value chain. Better know your customers by serving them better While many insurers have been actively investing in customer facing digital capabilities for the past several years, the industry as a whole is not yet fully realizing customer and economic value. As insurers continue to respond to constantly evolving customer expectations, a holistic, data-driven approach that drives a detailed understanding of the customer and the contribution of digital initiatives to actual business value will be critical to meaningful ROI. Developing a detailed understanding of customers and their end-to-end journeys is necessary to improve customer value. Knowing your customers – not just as segments but individuals – will help you pinpoint opportunities and effectively optimize their experience across all channels and throughout their lifetimes. Tying these digital initiatives to measurable business value from the beginning is critical to justifying the case for investment and creating a framework for measuring the effectiveness and impact of various initiatives. With a strong, flexible framework in place, companies will be able to re-focus time and money into revenue-driving capabilities like external partnerships, invest in data-driven digital capabilities to improve customer value, and build back-end processes to support platform scalability. Don’t forget about back-end processes All the recent hype about insurtech and customer interactions has shifted attention away from digital considerations beyond technology and customer experience. However, leading companies’ back-end processes will support a digital environment. In a rapidly advancing industry, the companies out in front are transforming their processes to automate repetitive, business rule-driven work; this is rapidly reducing costs, improving controls, enhancing quality, enabling scalability, and facilitating effective 24/7 service. Future profitability and ROI hinge on being extremely responsive to business and market conditions and making business processes digital. The market leaders of the future will have fully digitally enabled operating models that feature a low cost profile, increase automation and efficiencies, offer an easy end-user experience. All of this will help them accelerate innovation and invent the future of insurance instead of just reacting to it. See also: Digital Playbooks for Insurers (Part 1)   Where we’re headed The world of insurance has already become digital. Whether you are a personal lines insurer assessing digital sales and service platforms or a life insurer trying to understand interactions with your end consumers, most of the industry has adopted digital agendas and many companies are is seriously trying to become digital-first organizations. Current frontrunners are redirecting their roadmaps and investments to high-priority business areas differentiate them in the market. Over the next five to ten years, all insurers will be able to take advantage of a broader ecosystem of available tools, leveraging test and learn capabilities that promote innovate in an industry that has not been reinvented for quite some time. Anyone still waiting on the sidelines is in jeopardy of falling so far behind recovery will be extremely difficult. Don’t blink and miss your chance. Most of the insurance industry has adopted digital agendas and many companies are seriously trying to become digital-first organizations. If you aren’t doing the latter, you risk falling behind; if you haven’t done the former, you may never catch up. Implications

• Industry leaders are starting to leave behind the “follower” mentality, reallocating their investments into core capabilities that give them a more customer-centric view, as well as ways to differentiate themselves in the market. Whether you are a “fast- follower” (as opposed to just a follower) or a market innovator, you are likely to share essentially the same approach to establishing an agile organization.
• The companies that develop a meaningful competitive advantage will design and implement digital platforms that can handle disruption. They will build scalable systems, deliver an end-to-end customer experience, and change their business models to foster a test and learn environment that helps them improve how they go to market. These leaders will be the most likely to quickly adjust and grow as the industry continues to become more digital.
• With a strong, flexible framework in place, companies will be able to re-focus time and money into revenue-driving capabilities like external partnerships, invest in data-driven digital capabilities to improve customer value, and build back-end processes to support platform scalability.

This article was written by Jamie Yoder, Tom Kavanaugh, Juneen Belknap and Alex Jaeger.

Following on from our previous post on product development, which concluded the key themes section of our Global Trend Map, we now examine the insurance and insurtech trends in the world's major markets via our dedicated regional profiles. We focus on seven key regions. In our forthcoming posts, we will be referring back — on a regional and comparative basis — to the stats presented across our earlier installments on: Industry Challenges, Insurtech Perspectives, Insurer Priorities, Services, Investments & Job Roles, Analytics & AI, Digital Innovation, Internet of Things, Marketing & Customer-Centricity, Distribution, Claims, Fraud, Cybersecurity, Investment Management, Regulation and Product Development. Additionally, we supplement our statistics with perspectives and discussion from a range of local correspondents in each region. In this post, which introduces our regional profiles, we present a brief preview of each region including key external and internal challenges, as well as insurer priorities. Each preview kicks off with a Top-Trumps-style summary table of key stats (an exhaustive key explaining each measure is included in the full report). In our Profile on Europe, we draw on the expert opinions of Switzerland-based venture capitalist Spiros Margaris, VC (InsureScan.net, moneymeets & kapilendo), and Charlotte Halkett, former General Manager of Communications at UK-based telematics provider Insure The Box (now MD of Buzzvault at Buzzmove). For all their insights, simply download the full version of the report. Below is a sneak preview of the stats and themes we discuss in the full profile.

"Europe presents us with a potentially gloomy picture, with the on-going issues of low interest rates and weak growth prospects, to which we may add growing regulatory burdens and political uncertainty – especially in the wake of the UK’s Brexit vote. However, we have nonetheless gathered plenty of evidence that incumbents have the tools in place both to come through and to hold their own against new entrants." — Helen Raff, Head of Content at Insurance Nexus

i) The External Challenges: Europe In Europe, the top three external challenges facing the insurance industry as a whole follow the global trend we outlined in our earlier post on Industry Challenges: 'Technological advancement', 'Changing customer expectations' and 'Digital channel capabilities'. Looking further down the table, some points of note are the higher position attained by ‘Increased regulation’ and the lower positions of ‘New emerging risks’ and ‘Catastrophe risk’. Compared to some of the other regions we examine, like Africa and Asia-Pacific, Europe is relatively sheltered from natural catastrophes and the associated risks that they bring with them, which possibly explains the lower scores we find for ‘New emerging risks’ and ‘Catastrophe risk’. As for the prominence of the regulatory challenge, we need look no further than the EU’s Solvency II, which came into effect at the start of 2016 and represents the first major shakeup of the landscape since the 1970s. --- ii) The Internal Challenges: Europe Internally, the top challenges are close to the global trend we outlined in our earlier post on Industry Challenges: ‘Lack of innovation capabilities’ and ‘Legacy systems’ take first and second place respectively, with ‘Siloed operations’ edging out ‘Finding and hiring talent’in third place. --- iii) Insurer Priorities: Europe These are the priority areas on which European insurers lead our other regions, out of our shortlist of 15 priority areas presented in our earlier post on Insurer Priorities: "Customer-centricity is an important issue because insurance is a 'trusted good'. To address social values and preferences is important. Customer-centricity means building trust, branding and a business model based on relational values. Not for nothing: Empirical evidence shows that identity is the strongest customer KPI." — Andreas Staub, Manager Partner at FehrAdvice In our full profile for Europe, we dig deeper into these challenges and priority areas on a more qualitative note, with insights from our two regional contributors, Spiros Margarisand Charlotte Halkett. Key focal points of our discussion include:

1. Growth opportunities in a relatively saturated market
2. The European consumer and Europe’s ‘early adopter’ status
3. How European insurers are using new technologies to deliver on their customer promise
4. Dynamic, real-time insurance and IoT
5. Progress on developing connected insurance models across the continent as a whole

NORTH AMERICA PROFILE: Preview In our profile on North America, we corroborate, and expand on, our stats via the seasoned perspectives of Chicago-based Stephen Applebaum, Managing Partner at Insurance Solutions Group, and Boston-based Matthew Josefowicz, CEO at Novarica. Below is a sneak preview of the themes we tackle in the full profile.

"Rising claims costs – both attritional and catastrophic – against a backdrop of low interest rates calls for a new approach to insurance in North America. That the lion’s share of Insurtech deal money has been going to US companies suggests that this change of approach may not be long in coming." — Marsha Irving, Head of Innovation / Commercial Director at Insurance Nexus

--- i) The External Challenges: North America In North America, the top external challenges for the insurance sector as a whole follow the global trend from our earlier post on Industry Challenges, with ‘Technological advancement’ and ‘Changing customer expectations’ taking 1st and 2nd place respectively, except that in 3rd place we find ‘New emerging risks’. In comparison, this comes 4th globally and only makes 6th place in Europe – which, as we indicated in our Europe preview above, likely reflects some parts of the world being more exposed to disasters (and hence concomitant risks) than others. Further down the table, 'Increased competition' moves up a place, knocking 'Increased regulation' down one spot to 7th. See also: How Is Insurtech Different in Asia?   --- ii) The Internal Challenges: North America Looking internally, the top challenges reflect the global trend we outlined in our earlier post on Industry Challenges, except that ‘Legacy systems’ wrests the top slot from ‘Lack of innovation capabilities’ (which, by way of comparison, comes first in Europe and Asia-Pacific). Innovation is, at its heart, customer-driven, and, as part of our Regional Profiles, we compare the insurer-customer relationship in North America with what we find in our other key regions – and this may well explain the different positions ascribed to ‘Lack of innovation capabilities’ in their respective challenge tables. The parallel suggestion is that ‘Legacy systems’ play more of a role in North America, which is another theme our full profile investigates in more depth.

"Legacy systems has long been a core challenge for executives across functions within insurance carriers who are focused on innovation, customer experience and efficiency. Impacting product development, applying analytics, claims modernization, marketing optimization and more, it’s no surprise this is such a top priority for insurers. In the future, I think we’ll see more legacy system upgrades across insurers looking to digitize and streamline operations." —Emma Sheard, Head of Strategy at Insurance Nexus

--- iii) Insurer Priorities: North America These are the priority areas on which North American insurers lead our other regions, out of our shortlist of 15 priority areas as presented in our earlier post on Insurer Priorities: In our full profile for North America, we return to these challenges and priority areas, bouncing them off our two regional contributors, Stephen Applebaum and Matthew Josefowicz. Some of our key points of interest that emerge, and which we discuss in detail, are:

1. Insurers’ renewed focus on their primary underwriting business in the face of low interest rates and impending market disruption
2. The rise of the ‘new consumer’ and how this is changing the insurer-customer relationship
3. Customer-centricity as the prime mover of distribution and product
4. The impact of legacy systems and regulation on (re)insurers’ innovation and transformation efforts
5. How insurers are to unlock new sources of growth in a mature market

ASIA-PACIFIC PROFILE: Preview Our exploration of Asia-Pacific brings into play, alongside our statistics, the experience and perspectives of three in-region commentators: Steve Tunstall, CEO at Singapore-based Insurtech start-up Inzsure, João Neiva, Head of Innovation, IT and Business Change at Zurich Topas Life in Indonesia, and HK-based David Piesse, Chairman of IIS Ambassadors &Ambassador Asia Pacific at the International Insurance Society (IIS). What follows is a preview of our Asia-Pacific Profile (full thing here). --- i) The External Challenges: Asia-Pacific In Asia-Pacific, the top external challenges facing insurance as a whole follow the global trend familiar from our earlier post on Industry Challenges, with ‘Technological advancement’ and ‘Changing customer expectations’ taking first and second place respectively, except that, as in North America, in third place we find ‘New emerging risks’(by way of comparison, this challenge only makes 6th place in Europe). One possible explanation for the higher ranking of ‘New emerging risks’ is to be found in the related challenge of ‘Catastrophe risk’ – which also results one place higher in Asia-Pacific than was the global trend. While natural catastrophes are not emerging risks, in the sense that they have always occurred, their consequences are becoming more multifaceted as a result of the massive growth in urban areas and the rife interconnection of business in today’s globalised economy. This has introduced a new class of accumulation risk which could justifiably be called ‘emerging’. We know anecdotally that this phenomenon is particularly pronounced in the APAC region, which boasts some of the densest urban and business conglomerations in the world, in and among noted catastrophe zones, and the trend towards urbanisation and megacities is only set to continue. See also: Insurtech Ecosystem Emerging in Asia   Another detail we notice with the external challenges is the relatively high position attained by ‘Increased competition’ (two places up on the global trend), and we believe this is a natural consequence of the expansion opportunities on offer in the region. As we uncover in the course of our full Regional Profile for Asia-Pacific, this uneasy marriage of high growth and high competition is in many ways APAC’s defining market characteristic: to win is only ever to win big (get the full profile).

"The most significant challenges for insurers in Asia, from an IT perspective are: firstly, moving services to online sales – for agents, brokers, bancassurance and direct to customers; secondly, providing instant and ideally paperless servicing on claims management; and finally, the development of Chinese Insurtech players if they decide to compete outside of their local market." — Ash Shah, Regional CIO and Chief of Staff Property and Casualty at AXA Asia

--- ii) The Internal Challenges: Asia-Pacific The internal challenges highlighted by APAC respondents exactly replicate the global trend we staked out in earlier post on Industry Challenges, with a top three constituted by: ‘Lack of innovation capabilities’, ‘Legacy systems’ and ‘Finding and hiring talent’. --- iii) Insurer Priorities: Asia-Pacific The following 6 priority areas are those on which insurers in Asia-Pacific lead our other regions, out of our shortlist of 15 priority areas introduced in our earlier post on Insurer Priorities: "Doing nothing is not an option any longer. The top priority for many CEOs is to acquire the capabilities to deliver true digital innovation that achieves competitive advantage in a very short period of time. Understanding the agile and flexible lean techniques used within the start-up world can help. Analytics, the IoT or mobile are just enablers to ease such transformation." — Sabine VanderLinden, Managing Director at Startupbootcamp We return to these regional constellation of challenges and priority areas in our full Regional Profile for Asia-Pac, in which we present the direct market testimonies of Steve Tunstall, Joao Neiva and David Piesse. Key areas that we drill down into are:

• The high-growth, high-competition dynamic inherent in the Asia-Pacific insurance market
• The new calling for customer-centricity and the related question of disruption
• Using data and analytics to create more customer-centric products, such as personalised, on-demand insurance
• APAC distribution landscape and what insurers are doing to ensure scale for their products
• How to successfully manage back-office digital transformation

PROFILES FOR LATAM, MIDDLE EAST, AFRICA AND CENTRAL ASIA We are unable, given the constraints of this post, to provide full previews of our profiles for these regions. Suffice it to say, like the profiles that are presented here, they are fundamentally structured around discussion with in-region correspondents: --- LATAM Luiz Bruzadin, Founder at Brazil-based Insurtech Segure.me, and Hilario Itriago, CEO at VC fund Bullfrog Venture --- MIDDLE EAST Cherian John, 2017-18 Regional Chairman - Europe, Middle East & Africa at Million Dollar Round Table (MDRT), Ahmad Al-Qarishi, Chief Risk Officer and Chief Actuary at Saudi Re, and Israel-based Dani Cozer, Reinsurance Operations at I.D.I. Direct Insurance --- AFRICA George Otieno Ochieng, Claims Manager at Britam General Insurance Company, and Belhassen Tonat, Head of Non-Life at Munich Reinsurance Company of Africa Ltd --- CENTRAL ASIA Kevin Hartnett, Chief Operating Officer at The Insurance Corporation of Afghanistan (ICA)

Insurtech is a poorly defined term, and as a result is little understood across the industry. At one end of the spectrum it can refer to early stage startup spun out of the world of fintech to focus purely on insurance; at the other end of the spectrum, it can refer to anything remotely innovative around the application of technology within an insurance context. This ambiguity, coupled with a high degree of media attention, has led to confusion and inconsistencies in understanding future value. Typical accepted signs of success, such as a flurry of startup activity in a given sector, higher levels of hiring activity, new inward investment or exit values, are not always good indicators of future value — despite being useful pointers. Furthermore, focusing purely on market-visible startup activity omits equivalent innovation activity underway within insurers, either as part of incubation or greenfield ventures.

Increasingly, we are being asked to help identify the source for future value for a few select concepts being explored within insurtech, specifically around distribution, proposition design and business model formation. Although there is a significant amount of public information available across the market for startup activity, venture activity and exit values, there is a dearth of data available on market traction and customer value. Consequently, in this research, Celent chose to break down insurtech into a set of characteristics that describe a future vision of insurance, around which some predictions around time-to-value could be made. They include attributes like a heightened level of digital engagement, a switch in proposition from purely indemnity toward active loss prevention, a fundamentally different business model and a shift toward a more agile way of working. We refer to these as “insurtech concepts,” and they can be evidenced in both startup ventures and an insurer’s innovation activity, helping to make them universal in their applicability.

See also: How to Embrace Insurtech Culture  

Given this inherent market and data collection difficulty at this early stage, we gathered 72 expert predictions of time-to-value for some of these specific insurtech concepts and general preparedness from our innovation leaders panel. The findings from this research have been insightful.

When the insurtech concepts are viewed in their entirety across all lines of business, a number of patterns begin to emerge when evaluating expert predictions for time-to-value. Using these predictions, innovations and new partnerships in distribution are likely to remain the primary focus of insurers for generating value in both the near and medium term. Given the activity already underway around robo advice, aggregators and digital platform partnerships, this observation may come as no surprise. With respect to the proposition, the focus on patterns for continuous engagement also attract a degree of attention (with 92% expecting a significant shift within the next five years), albeit largely focused on existing propositions and models. Experimentation beyond this for the proposition will differ depending on the market segment and product line. It is likely that retail propositions will continue to become more sophisticated in pricing and the use of external data (from sensors or otherwise) for tailoring the price to the end customer, while commercial continues to develop around disaggregation and the formation of alternative distribution, and active loss avoidance. Although the switch to becoming a more virtual organization appears to attract less attention today, Celent believes that the fast pace of AI maturation will provide a more certain path to value in the near term. This sentiment is also being echoed in client conversations we have had as part of the 2018 planning process, as can be seen in Celent’s latest insurance innovation outlook report.

Other highlights include:

• When analyzing the expert predictions for a selection of insurtech concepts by line of business, the time-to-value expectations between retail personal lines and commercial lines, and among life, health and P&C, can vary by some degree.
• Based upon these findings, it is clear that greater levels of change are expected sooner in retail personal lines than, say, either life or commercial P&C.
• Regardless of line of business, there is an expectation that technology-led innovations focused on distribution will have a greater impact in the near term.
• An overall shift in proposition toward continuous engagement (92% over five years) and move toward product distribution via aggregators (86% over five years) also appear likely in the near term.
• Although still represented within an insurer’s innovation activity, the timeframe to achieve future value from new tech-enabled propositions and business models remains less certain; a longer time horizon is expected. Consequently, greater care needs to be taken when allocating resources.

Although still at a nascent stage, insurers should prepare to adapt innovation activities to recognize the different expectations for time-to-value between lines of business, while maintaining a strong focus on innovation in distribution regardless, because disruption in this part of the value chain is already clearly signposted.

See also: Key Insurtech Trends to Watch  

This report is the first of a two-report series. Part 1 focuses on time-to-value for given insurtech concepts. Part 2 explores how insurance company innovators are approaching insurtech in their ambitions to engage.

You can find the full report here.

While AI systems can now learn a game and beat champions within hours, they are hard to apply to business applications.

MIT Sloan Management Review and Boston Consulting Group surveyed 3,000 business executives and found that while 85% of them thought that AI would provide their companies with a competitive advantage, only 1 in 20 had “extensively” incorporated it into their offerings or processes. The challenge is that implementing AI isn’t as easy as installing software. It requires expertise, vision and information that isn’t easily accessible.

When you look at well-known applications of AI, such as Google’s AlphaGo Zero, you get the impression it is like magic: AI learned the world’s most difficult board game in just three days and beat champions; Nvidia’s AI can generate photorealistic images of people who look like celebrities just by looking at pictures of real ones.

But most business problems can’t be turned into a game; you have more than two players, and there aren’t clear rules. The outcomes of business decisions are rarely clear wins or losses, and there are far too many variables. It is a lot more difficult for businesses to implement AI than it seems.

Today’s AI systems do their best to emulate the functioning of the human brain’s neural networks but do this in a very limited way.  They use a technique called deep learning, which adjusts the relationships of computer instructions designed to behave like neurons. To put it simply, you tell an AI exactly what you want it to learn and provide it with clearly labeled examples, and it analyzes the patterns in that data and stores them for future application. The accuracy of its patterns depends on data, so the more examples you give it, the more useful it becomes.

Herein lies a problem. An AI is only as good as the data it receives and is able to interpret it only within the narrow confines of the supplied context. It doesn’t “understand” what it has analyzed, so it is unable to apply its analysis to scenarios in other contexts. And it can’t distinguish causation from correlation. AI is more like an Excel spreadsheet on steroids than like a thinker.

The bigger difficulty in working with this form of AI is that what it has learned remains a mystery: a set of indefinable responses to data. Once a neural network is trained, not even its designer knows exactly how it is doing what it does. As New York University Professor Gary Marcus explains, deep learning systems have millions or even billions of parameters, identifiable to their developers only in terms of their geography within a complex neural network. They are a “black box,” researchers say.

Speaking about the new developments in AlphaGo, Google/DeepMind Chief Executive Demis Hassabis reportedly said, “It doesn’t play like a human, and it doesn’t play like a program.  It plays in a third, almost alien, way.”

Businesses can’t afford to have their systems making alien decisions. They face regulatory requirements and reputational concerns and must be able to understand, explain and demonstrate the logic behind each decision they make.

For AI to be more valuable, it needs to be able to look at the big picture and include many more sources of information than the computer systems it is replacing.

See also: Strategist’s Guide to Artificial Intelligence  

In inventory management, for example, purchasing decisions are usually made by experienced individuals called buyers, department by department. Their systems show them inventory levels by store, and they use their experience and instincts to place orders. An AI could consolidate data from all departments to see the larger trends — and relate them to socioeconomic data, customer-service inquiries, satellite images of competitors’ parking lots, predictions from the Weather Company and other factors. Many retailers, including Amazon.com, are doing some of these things.

AI is advancing rapidly and will surely make it easier to clean up and integrate data. But business leaders will still need to understand what it really does and create a vision for its use — that is when they will see the big benefits.