Much has been written of late about how technology — referred to as “insurtech” — is transforming insurance. While some of these solutions are actually in use, many more are still conceptual and speculative, so adoption is anticipated. But make no mistake: The majority of these technologies will be adopted in time, and they will ultimately transform the ways that insurance products are created, priced, packaged, marketed, sold, distributed and serviced. And the claims function — along with the insurance policyholders who incur those claims —is the most likely early beneficiary, with auto insurance leading the way. In a 2017 survey of 400 North American claims executives conducted by Insurance Nexus, a significant 78% of respondents confirmed that “the American insurance claims industry is in the midst of significant disruption,” and 82% confirmed that “our executive teams are dedicated to transforming the claims function.” Claims innovation ranked as the most important project for 61% of the audience, and 60% agreed that “my organization has a specific plan for how they are going to achieve claims innovation, utilizing technology, focused on customer experience and meeting the challenges of disruption.” Note the words “utilizing technology, focused on customer experience.” Now overlay on top of all this a recent, unexpected and somewhat counter-intuitive spike in auto claims frequency courtesy of a negative by-product of gradual (but welcome) economic recovery. Most of us had assumed — wrongly, it turns out — that the recent trend of declining auto claims frequency would continue. Most expected that auto claims might even decline further as accident avoidance and automated driver assistance technology and the specter of autonomous vehicles began to appear. Finally, add one additional element to this “perfect storm” of forces converging on auto claims: The very accident-avoidance technology whose main purpose was to reduce accidents has actually increased the cost and severity of repairing these technology-laden vehicles that become involved in accidents (frequently with older-model, less-well-equipped cars). See also: Insurtechs Are Pushing for Transparency   While claims organizations are busy trying to figure out how to contain the rising numbers and costs of auto claims, and, at the same time, piloting insurtech solutions are trying to help, the customer experience for policyholders that have been involved in these accidents is often getting overlooked. In an effort to accomplish cost reductions while also making the accident claim reporting process simpler and faster for policyholders, some carriers have begun providing smartphone apps for use in reporting accident claims and submitting photos of the damage. In some cases, these photos may enable the carrier to estimate the cost of repairing the damage, refer the customer to a convenient, qualified repair facility or even close the claim online with an electronic payment for the estimate amount. In fact, Allstate, the nation’s largest publicly traded auto insurance carrier, just announced that it has begun a countrywide transition from drive-in inspection centers to customer photo-estimating; the company expects the vast majority of drivable auto claims to be virtually inspected nationally in 2017. The next wave of insurtech will introduce automation, voice recognition, artificial intelligence and chatbots to the insurance claims reporting and customer service process as these more-efficient technologies begin to replace more expensive humans. This evolution will definitely benefit carriers from a cost-reduction perspective and will likely satisfy a growing number of customers who trust — and even prefer — such digital interactions. Drivers who use a telematics system — an electronic concierge or in-vehicle personal communications system — can request emergency roadside assistance and receive limited advice and support regarding insurance claims as the result of an accident. You may have already noticed that police in many urban markets are no longer responding to auto accident calls. Law enforcement budgets are shrinking, and police officers are busy handling higher-priority tasks, such as criminal investigations. So we can’t rely on the police showing up after an accident any more. The missing piece in all of this is what happens immediately after an accident occurs and before your insurance company starts to process your claim. For individuals involved in car accidents who are not “digital natives” and who may be injured or just too shaken up to deal with all of that or who just need the comfort and assistance of a trained and compassionate person, innovative programs will emerge to bridge the gap between the accident and the claim report. One such solution, originally established in Canada, is ASSI’s Collision Reporting Centers (CRC). These facilities provide drivers with the assistance, advice and support they need at that critical time immediately following an accident. The CRC is a private-public partnership between local police departments and privately managed reporting centers. Insurtech solutions are used in the CRC to electronically notify insurance carriers of collisions. The CRC provides electronic copies of written statements, vehicle damage photos and state-mandated reports needed to expedite a quick resolution of claims. Recently, ASSI expanded into the U.S., opening its first Collision Reporting Center in Roanoke, VA, in the fall of 2016, with plans to open many more centers nationally. New functionality being introduced includes electronic first notice of loss, possible total loss warnings and photo estimating. See also: Insurtech: Unstoppable Momentum   As we move toward self-driving automobiles and the elimination of most accidents, we will see many innovative accident and claim management programs emerge to bridge the gap between the auto accident and the resolution of the claim process. The insurance industry is working hard to adapt to rapidly changing market conditions, and technology offers promising solutions as well as difficult challenges — finding the appropriate balance between efficiency and the necessary human touch in the claim process will separate tomorrow’s leading brands from their competitors. Not only can insurtech and claims customer experience co-exist, they will have to!

The concept of microinsurance has been around for a long time, and the activity in that area is now increasing rapidly, especially due to the InsurTech movement. Pervasive mobile and digital capabilities along with cloud computing have made it much easier to insure a wide range of individual events, activities, or things for a short period. On the other end of the spectrum, the idea of a unified, all-risks coverage for an individual has long been theorized, but underwriting a person for auto, home, liability, life, disability, and other risks in one bundle has not yet been practical.

I’m going to call this one-policy-covers-all-risk approach macro-insurance. Now that technology is advancing so rapidly, and customer expectations for innovative solutions are high, could macro-insurance become a reality? Will we face a time in the future when customers must choose between the micro or macro approaches for insurance coverage?

See also: Big New Role for Microinsurance  

This might seem like an academic question, but there is at least one new entity that plans to offer a type of macro-insurance. An InsurTech called Sherpa promises to provide customers coverage across all insurance sectors using a single underwriting process and capitalizing on a direct business model (no agents or commissions). The company claims to have a process that uses new data sources, artificial intelligence, and deep analytics. This could be dismissed as another hare-brained idea from people that do not really understand insurance. However, Sherpa is collaborating with Gen RE and Guy Carpenter, which adds instant credibility to the venture.

Whether Sherpa will be successful remains to be seen, but it might be worthwhile to explore the opportunities and challenges related macro-insurance to get a glimpse into how these developments might affect the insurance industry from different perspectives.

Customer: From a customer perspective, the idea of an all-risks policy with no agent commission seems quite appealing. Who wouldn’t want to go through an underwriting process once and have coverage for all the typical risks a person (or business) is likely to face? However, some people might have an issue with “putting all of one’s eggs in the same basket.” That could be a deterrent to the macro approach for some customers.

Agent: At least in the Sherpa example, there are no agents. So this is a non-starter for distribution partners. However, other models may arise that offer macro-coverage and rely on the advice and council from either a fee-based or commissioned agent.

Actuary: Yikes, where to start! The macro approach is an actuary’s nightmare. There are two possible approaches. First, it may be that a team of actuaries works together to contribute in their areas of expertise to design new products. The second possibility is that actuarial is completely revolutionized, with AI and advanced analytics playing a key role, using a blend of traditional and new data elements. In either case, pricing precision will likely take some time to evolve.

Underwriter: Underwriting the person is a different approach and will require some blend of human expertise in different fields with new data and advanced technologies. Any way you look at it, underwriting becomes a completely new game in the macro-insurance world.

We could continue to explore other roles and other implications of these approaches, especially the complex regulation angle. But these initial discussions provide a preview into the kinds of issues that the industry needs to tackle. At this stage, micro-insurance is off and running, with companies like Trov, Slice, and LenderBot making strides. Macro-insurance is in its infancy and may take a long time to develop, but the concept is intriguing, and it appears that the industry is willing to begin to explore the potential.

See also: 5 Innovations in Microinsurance  

So, what’s gonna happen? The most likely scenario is that traditional insurance lines of business will remain for a long time, supplemented by rapid growth in micro-insurance that often extends into new coverage areas, while macro-insurance begins a period of discovery and slow evolution.

When I consider friends and family who have been blessed with happy partnerships, I realize there are many roads to establishing a successful relationship. Yet I also recognize there are a number of common factors that exist throughout the process. The same, I believe, can be said for the underwriter/broker relationship. While there are many roads leading to success, there is a common set of rules to establishing long-term, productive relationships. What follows are a few observations I have gained during more than 20 years working on the insurance company and brokerage sides of the business.

1. It is a relationship.

Try to find the human endeavor that does not include a relationship, and you are likely to be looking for a long time. The keys to success in just about any relationship also apply to the underwriter/broker relationship: respect, honesty, regard for each other’s abilities, an understanding of each other’s constraints, reasonable expectations, collaboration, communication and consistency.

2. Brokers often play offense, while underwriters typically play defense.

While brokers and underwriters share a common goal — a long-term, mutually profitable relationship — there are also basic differences that could potentially sabotage this relationship. A broker, by nature, is usually extroverted, competitive and persistent. On the other hand, an underwriter may be more analytical, possess a more conservative view and be specifically task-focused. Understanding each other’s points of view allows us to build a trusting, productive relationship. See also: Data Opportunities in Underwriting  

3. Submission quality is critical.

Each time a broker provides a submission to an underwriter, he or she hopes to receive a timely acknowledgement; however, this response is predicated on the quality of the information provided. A thorough description of operations; historical and future exposure data; currently valued loss information that includes detailed summaries of large losses; and completed and in-progress risk management initiatives improving the insured’s risk profile are vital to the triage process and underwriter assessment regarding whether to dedicate resources to move forward.

4. Watch the clock.

Waste, plain and simple, is wrong. It is wrong whether the item being wasted is food, water, money, talent, effort or precious natural resources. It is also wrong when the resource being wasted is time. Any time a broker takes shortcuts in crafting a submission, he or she is wasting the underwriter’s time. Imagine the underwriter as a quarterback with a finite amount of time left on the game clock. The quarterback only has time enough to run a certain number of plays. The submission sent in by a broker is the equivalent of one of those plays. By presenting a poorly constructed submission with inadequate detail and information, a broker is using up one of the underwriter’s valuable plays. This is why brokers must help underwriters manage the clock by only sending in opportunities with a reasonable chance for success and “points on the board.”

5. Pick your partners wisely.

As previously noted, it’s a relationship. And, it should go without saying, not everyone is meant to end up together. Carriers typically have defined areas of expertise and underwriting appetite. Brokers have the responsibility of understanding these parameters but, when appropriate, underwriters should be approached through a phone call or in-person meeting to discuss the interest level and viability of an opportunity.  During this process, underwriters have a duty to listen to the story until a final determination can be made.

6. “No” is not an answer; it is a choice.

Underwriters do not like to say no to a broker’s submission because there are no winners in that situation. In an ideal world, all submissions would result in a quote being delivered that adequately balances risk with expected return for the carrier. While there will inevitably be the occasional judgment call, a broker who has done his or her homework regarding both the prospective insured and the underwriter’s appetite for risk will be able to determine with a high degree of confidence whether or not the submission will receive the desired response. The underwriter, who will typically be long on pending proposals and short on time, will appreciate the consideration shown by a broker who does not clutter his or her in-basket with born losers. In turn, the underwriter should appropriately show appreciation by considering proposals submitted by brokers who have demonstrated a clear understanding of the respective carrier’s underwriting appetite by responding in a timely manner.

7. Work hard for each other.

Brokers need underwriters to insure their clients. Underwriters need brokers to present new opportunities for profitable growth. Neither party can exist or succeed without the earnest efforts of the other. As in any codependent relationship, neither party will achieve its full potential if one half of the relationship is simply dialing it in. Brokers and underwriters owe it to each other to show up, challenge each other and succeed together.

8. Each party has a job to do.

Although brokers and underwriters are engaged in a mutual effort, each has separate and unique responsibilities. Brokers must continually generate a sufficient flow of high-quality, profitable leads for carriers. They must also service their books of business with dependable back-room support, resulting in long-term client satisfaction. Carriers must maintain financial stability, diverse product offerings and a credible reputation of prompt and amicable claim resolution. Each party must be able to depend on the other’s consistently earnest effort. It is unjust for the carrier to supply high-quality products while the broker delivers poor-quality service. It is equally unjust for the broker to provide high-quality deliverables while the carrier struggles to deliver on its contractual obligations.

9. Underwriters should leave mystery to the Sphinx.

The more brokers that know about an underwriter’s appetite for risk, the better able they will be to deliver reasonable submission flow. Upon rejecting a proposal, the underwriter should clearly specify the reasons why to the broker. Do so in a constructive manner meant to help the broker submit stronger, more targeted opportunities in the future. Brokers, on their part, should look past rejection to gain insight, potentially resulting in greater opportunities for success.

10. Represent your company while remembering you also represent yourself.

How many of us will work for only one company throughout our careers? The answer is a precious few. While each one of us owes a debt of loyalty to the company whose name is on our paycheck, we must, at all times, also represent our own sense of right and wrong. Our reputation is the most important thing you possess throughout our professional career.

11. Spread the joy.

Both underwriters and brokers are engaged in the risk management business. It is only reasonable, therefore, that neither party place too many eggs in too few baskets. While diversity for diversity’s sake is not a good idea, establishing multiple high-quality relationships is. See also: The 5 I’s of Underwriting  

12. Underwriters should take special care to support new brokerages.

The industry needs the large brokerages, regional representatives and new organizations working to establish themselves. The insurance community will only become stronger with the addition of new brokerage competitors and distribution channels as they pump fresh energy and ideas into the industry. Be on the lookout for talented newcomers and support them to the extent of your ability; they are the stepping-stones leading all of us to a brighter future for the community.

13. Respect the confidentiality of each relationship.

Each broker works with many underwriters, just as each underwriter works with multiple brokerages. Honoring the confidentiality of each relationship is not only the right thing to do, it is the smart thing to do. The betrayal of a confidence can lead to the loss of trust — irreparably damaging a productive, profitable relationship.

14. Remember to have fun.

Each spring, our company hosts an annual party to which we invite underwriters. We see this as an opportunity to express our gratitude to the underwriting community and to celebrate our mutual successes. We are on a shared journey with our carrier partners, and, like all journeys, this one becomes more enjoyable if we can have a few laughs together. This article originally appeared on CarrierManagement.

If we take a stroll in the woods today, there are unlikely to be the fabled Teddy Bear picnics waiting for us on a pleasant spring day in the bluebell-filled woodlands. In all probability, as we take some well-deserved time out from the high pressure, cut and thrust of daily business, we’ll start to contemplate what the future holds. It’s likely that we will swiftly move from thinking about our home and family life, to the current issues that we would rather have left at the office. Such is life. The insurance industry is no spring chicken; it’s been around for hundreds of years.  Smoky coffee houses have been replaced with sterile air-conditioned offices where computer systems dictate to a large extent the modus operandi for the company as a whole. The goal, however, is to use technology to recapture some of the simplicity of the Teddy Bear picnic. Can we bring some of that relaxed peace of mind to the insurance process? Infrastructure Impacts Customers Everyone acknowledges that modern software and technology are required to support a 21^stcentury commercial enterprise; the difficulties arise when they no longer keep pace with the realities of the “modern world”. According to Majesco’s research, insurance operations are affected by three primary factors; people, technology and shifting market boundaries.  The cold reality is that existing infrastructures are not up to coping with the new challenges presented. This really shouldn’t come as a surprise given that the standard IT project runs into the tens of millions of pounds over multi-year implementations. See also: Infrastructure: Risks and Opportunities   Consumers, including business owners, use technology every day. It is, for the most part, highly responsive and accessible to their needs.   We all carry mobile phones, portable offices in their own right, providing a gateway to the wonderful world of digital commerce. Sadly in contrast, most insurance interactions are woefully short of providing an intuitive, functionally-rich customer experience.  As a consumer, all I want is an easy-to-use application that feels friendly and delivers options that fit my need. Infrastructure Impacts Insurer Opportunities Emerging technology coming to market, like the Internet of things (IOT), is a logical extension of the Internet.  Data is now all around us. The Internet provides a conduit to create and collect data and, in theory, allows the consumer and organisations to make better commercial decisions. However, many traditional insurers are struggling to capture this new data, let alone know how to use and interpret the data to improve their products and services.  Historical rating processes were not designed to use the raft of data now available. We’re surrounded by a sea of data that should improve our lot. But traditional insurers are slow in the use of this data, compared to new market entrants that are exploiting data’s opportunities. Living in a connected, data-rich world is opening up tremendous opportunities for new greenfields or start-ups that are deft in their thinking and brave enough to take on the established market.  Some will succeed and some will fail.  Those that fail will likely lack the commercial muscle to rise above the market noise and bring new business models and products to market.  Ultimately it’s the customer who will make the choice and drive the change, regardless of incumbent players who may overtly offer support to new initiatives, but have little imperative to change. Times are a changing…. gradually. Infrastructure Transformation is Now More Accessible The days of multimillion-pound, multi-year programs to create a modern business platform for today’s modern insurance needs is no longer viable. Majesco is highly engaged in these market changes, working with both new startups and greenfields, as well as existing traditional insurers to provide a path to this new future.  Our cloud business platform, Majesco CloudInsurer, provides an “out of the box” pay-as-you-grow option that delivers speed to value – speed to implementation, speed to market and speed to revenue.  The requisite connections to new data sources like IOT, reporting bureaus and more are all ready to use.  This allows new or existing businesses to concentrate on creating differentiation through the diversity and uniqueness of their products, services, and channels to their existing or new customer segments, helping to drive growth. Does it matter? Will it make a difference?  In a recent Majesco survey, consumers overwhelmingly agreed that it is important for insurers to provide an easier customer journey. This was also the case in our SMB research, The Rise of the New Small Medium Business Insurance Customer. See also: New Approach to Risk and Infrastructure? A combination of highly tailored, personalized products, dynamically priced based on new data sources, delivered via the channel of choice is what the market demands and is clearly the order of the day.  Majesco provides the modern business platform to help our customers meet these new demands with a speed to value proposition that is highly responsive to changing conditions. Can you find the Teddy Bear picnic among the stresses of infrastructure need? It might be tough. Can you give your customers a Teddy Bear picnic experience when they are purchasing insurance? Perhaps modernizing your insurance infrastructure will help you come fairly close. This article originally appeared on Majesco and was written by Mike Smart.

Health City Cayman Islands (HCCI) is a three-year-old, 104-bed Caribbean hospital outpost of the Bangalore, India-based Narayana Health System. Just an hour’s flight from Miami, its island location is comfortably familiar to Americans, is English-speaking and is modern. Specializing in complicated or severe conditions, HCCI has developed care and business models that are so focused on quality and efficiency that it could radically change the standards by which U.S. hospitals are judged. Most importantly for patients and employers, it provides very high quality care — it has been awarded the coveted Joint Commission International (JCI) quality credential at one-half to one-sixth of U.S. pricing. HCCI’s performance is the culmination of a deep commitment to access, efficiency and excellence. Narayana Health’s (NH) founder, Dr. Devi Shetty, who, earlier in his career was Mother Teresa’s personal physician, began with the mission-driven awareness that healthcare is an essential need that must be affordable to be accessible. He spearheaded an enterprise-wide focus on process optimization to deliver the best care possible at the lowest possible price. The results have been remarkable. Fifteen years ago, NH’s bundled costs for open heart surgery in India averaged about $2,000. Now, they are about $1,400, or about 1% of the average U.S. costs. The costs at the Caribbean hospital are higher, but they are still low compared with U.S. standards. A coronary artery bypass graft that typically costs about $151,000 in the U.S. is $32,000 at the Caribbean hospital. Heart valve replacements, about $174,000 here, are $31,000. Hepatitis C treatments, which run about $75,000 here, are $19,000. Knee replacements, which cost $60,000 here, are $16,000. See also: A Hospital That Leads World on Transparency   A relentless willingness to rethink HCCI’s capacity to consistently deliver low costs and high-quality outcomes is rooted in a relentless willingness to rethink and execute better, more pragmatic approaches. Hospital common spaces — atriums and open areas — are smaller than we’ve come to expect in U.S. hospitals, significantly reducing overhead. Each patient room has its own heating and air conditioning unit and ducting, isolating the room’s air flow, which dramatically reduces infection. Operating rooms are connected to the laboratory by pneumatic tubes, so surgeons can get immediate information about patient specimens. Equipment, supplies and drugs are purchased in Europe or India at a fraction of U.S. prices. Rather than receive a bewildering array of bills, HCCI uses bundled, all-inclusive pricing that is so simplified that its billing department needs only three people. Every aspect of hospital function and care process is open to re-examination, which facilitates lots of minor (and sometimes major) improvements. Just after HCCI’s gala opening in April 2014, Robert Pearl MD, the CEO of the 19,000 physician Permanente Medical Group, wrote in Forbes: “Based on everything I saw in the Cayman Islands, the operational approaches in Dr. Shetty’s hospital are about 10 years ahead of those used in the typical U.S. hospital.” HCCI’s health outcomes and pricing represent an opportunity for self-insured employers and unions — as well as for self-pay patients — to get genuinely superior care at far more affordable rates. While getting employers to consider sending patients outside U.S. borders for care has been a challenge, the trickle of those who have become convinced that the quality is strong enough to merit their consideration is growing rapidly. Imagine how local and state governments, financially strapped by excessive healthcare costs, could benefit from a higher value resource such as this. Florida’s Medicaid program, for example, has some 20,000 patients with Hepatitis C. Even with a discounted U.S. rate of, say, $54,000 each, HCCI’s bundled rate of $19,000 — a difference of $35,000 per patient — could save the state about $700 million, funds that surely could be used more productively. It is important to acknowledge that there are U.S. hospitals that have achieved superb quality or very notable cost streamlining. But rarely do we see a single-minded organizational emphasis on both affordable cost and quality excellence that is consistently delivered. That is HCCI’s innovation. See also: Survivor: Hospital Edition   The bottom line Against a backdrop of systemic healthcare excess, American employers will increasingly opt for equal or better care at lower cost from facilities such as HCCI. This could force domestic hospitals to follow suit and could help to bring American healthcare back into balance. This article originally appeared on Jacksonville.com.

Nobody can have too many BFFs (that’s best friends forever in today’s texting-driven vernacular).  That statement goes double for claims adjusters who are frequently seen as “bad guys” because of all the difficult-to-understand complexities of the adjusting process. The reality is that claims adjusters do not get enough recognition for the many times they go the far distant extra mile to help a customer after an auto accident. Claims adjusters need all the tools they can possibly get to deliver customer service at the high levels they want to deliver. And telematics is here to the rescue! Many insurers see telematics only as a new way to rate auto insurance coverages, perhaps even replacing traditional rating criteria as some InsurTech innovators are doing. Other insurers only see telematics as a new way to underwrite auto policies, replacing traditional and sometimes complicated criteria with usage-based facts. These are all real situations. But what most insurers do not yet see is that telematics can be a way to give claims adjusters a customer service tool that, incidentally, improves claims financial outcomes. And who doesn’t love a win-win! See also: Telematics: Moving Out of the Dark Ages?   A new claims adjuster, right after getting a company ID badge and signing up for company benefits with HR, learns that the sooner the company is advised of a claim, the better the odds are the company can assure a successful outcome and control costs. That’s Claims Adjusting 101. Many insurers have addressed this by directing the first notice of loss from the consumer through a company contact center or service provider. More recently, companies have developed FNOL apps for mobile devices so that claims reporting can kick off shortly after paperwork is exchanged at the site of the accident. But, what if the FNOL could be generated as the accident happens? As a matter of fact, state-of-the-art telematics can actually do this. Leading telematics technology can generate the FNOL from the actual impact dynamics. Appropriately implemented, this means that an emergency medical response could be automatically initiated if the impact details warrant it. In the event of a serious crash, this could make a critical difference in treatment outcomes. Towing services could also be initiated, getting the vehicle off the roadway sooner. Body shops and storage facilities could also be looped in as appropriate. Being the technology-enabled “first on the scene,” and providing much-needed assistance at a stressful time puts any claims adjuster on the fast track to BFF status. And, returning to Claims Adjusting 101, it helps with the positive management of claims costs. The benefits of telematics in auto claims adjusting don’t stop there. Telematics can provide factual details that sometimes elude those involved in the event. When asked what happened, those involved in the accident very frequently respond with “it all happened so fast.” Telematics facts can replace post-loss perceptions of the event, thus helping the adjuster move the claim along faster. The telematics-defined dynamics of an accident can also aid in injury assessment, again, moving the claim process along. There’s more. Vehicle repair can be an arduous process, particularly if the damage renders a vehicle unusable. Not having a car is clearly a source of frustration for most individuals. Simply getting all the assessment details can hinge on visual inspections, reports, and sending photos. Telematics can provide impact details and dynamics that can speed this process along, leap-frogging traditional claims processes to reunite vehicle and driver sooner. Another BFF moment! In my role, I have spoken to a great number of claims executives. I have yet to meet any who did not see themselves and their organization as a key driver, if not the number one driver, of customer satisfaction. There are a good number of tools that claims organizations possess to deliver excellent customer service. And you can never have too many customer service capabilities (just as you can never have too many BFFs). Insurers should assess their existing or newly planned telematics initiatives and expand the opportunities for value and customer service beyond rating and underwriting to claims operations. Many technologies benefit one product line, or one discipline, or one process. It is, indeed, a top priority technology initiative that can span the organization at many levels, improving customer service and bottom-line results simultaneously. Telematics should be on the short list. See also: Lessons From New Telematics Firm   For additional thoughts on how telematics can be a successful component of an anti-fraud strategy, please read our blog Fraud is Not a Cost of Doing Business – And Emerging Tech is Here to Prove It!

We've had so many insurtechs fill out Market Maturity Reviews, providing detailed insights about themselves at our Innovator's Edge site, that this month's Six Startups to Watch will highlight the most interesting newcomers among the more than 1,000 startups we track. Here they are:

—Understory. The company is setting up networks of inexpensive weather stations in cities to provide information to insurers about what is actually happening on the ground, rather than what satellite images suggest is happening. (I saw the value of this last October, when my wife had to pull off to the side of the road in an early winter storm in Truckee, CA. She called to ask about the progress of the storm, and I assured her that satellite images showed it was raining in Truckee and only snowing nearer to Lake Tahoe. She promptly sent me photos showing two feet of snow on the ground and a near whiteout in "rainy" Truckee. For once in our marriage, I learned I was wrong....) The company set up its first network in Kansas City and recently expanded to Dallas, Fort Worth, Houston, Denver and St. Louis. Each network consists of 50 to 150 sensor-filled stations spread around a metropolitan area at schools, churches and other sites where Understory rents space. Insurers get immediate information on, say, a hail storm and can contact customers immediately afterward if they are likely to have damage—pleasing customers, who are unaccustomed to having an insurer look out for them, while repairing damage before it can get worse.

—Wellthie. This insurtech began by sorting through the complexity that is Obamacare, making it easier for insurers to show how their offerings fit within the new structure and for brokers and their clients to find the best coverage. Wellthie now addresses health insurance more broadly, focusing on packages for small business.

—Edgepoint Digital. Based in Tanzania, this company provides health insurance for as little as $1 a month. That is not a typo—a dollar sign followed by a 1, followed by no zeroes. The coverage, aimed at families that earn some $70 a month, requires extraordinary efficiency in processing, based on the M-pesa mobile money transfer system that has taken hold in Africa. Edgepoint, whose offering is called Jamii, has received backing from the Gates Foundation, among many others. Edgepoint is worth a look both for the social good it could accomplish and for what it may show about a concept called "reverse innovation," or "trickle-up innovation." The idea is that not every idea has to begin in the developed world and migrate to the developing world. In fact, when it comes to cost-effective solutions, ideas can begin in the developing world—you may be more likely to find radical innovation if you start by thinking about families earning $70 a month than if you start with those earning the U.S. median of $52,000. Reverse innovation has already happened with refrigerators, medical equipment and other products. Maybe insurance is next.

—ElevateBenefits. It seems that comparison sites don't need to limit themselves to products and prices. This startup provides a way to compare brokers, too, for employee benefits, through its brokerSpotlight tool. Competition is everywhere these days. 

—Instanda. The product development cycle in insurance has historically been measured in months, not weeks, and certainly not days. But the pace of innovation in an industry depends on cycle time for product development—how quickly a product can be generated, tested and revised or tossed aside. Regulation will always limit speed in insurance, as it should, but product development can move far faster than it does now, and Instanda provides a tool that can greatly speed the process. 

—Bold Penguin. The portal allows the insurance agent and carrier to streamline the quoting, binding and servicing elements of policies, an area of major friction for not only them but also for clients. The company—which teamed up in April with Ask Kodiak, which has a tool that matches clients with carriers interested in their sort of risk—aims to move placing commercial insurance to digital, paperless processes. 

Cheers,

Paul Carroll,
Editor-in-Chief 

A massive cyberattack involving a ransomware software program called Wanna Decryptor, also known as “WannaCry,” recently swept the globe, freezing computer systems and causing major disruptions. The attack — which is the largest ransomware infestation ever — affected tens of thousands of organizations across the globe and a wide range of industry sectors, including the U.K.'s National Health Service (NHS), Spanish telecom giant Telefonica, French car maker Renault, Portugal’s Telecom and U.S. delivery company FedEx, among many others. The attack reportedly affected nearly 150 countries. Ransomware (a combination of the terms "malware" and "ransom") has become an increasingly common form of cyber extortion. It often involves extortionists taking control of a computer system and locking files and data on the system by encryption, thereby rendering them inaccessible and useless, until a demand for payment, typically in Bitcoin, is satisfied. A typical form of ransomware, WannaCry does the following: 1) locks all data on the victims’ computer systems; 2) informs victims that their files have been encrypted; 3) warns that those files will be deleted unless payment in Bitcoin is received; and 4) provides instructions for executing and sending the payment. Ransomware has become frighteningly pervasive and increasingly serious and expensive. Ransomware attacks quadrupled from 2015 through 2016, to an estimated 4,000 per day according to the U.S. Department of Justice and, as punctuated by WannaCry, are projected to double yet again in 2017. These types of cyberattacks can, and do, cause significant operational disruption, often halting a business in its tracks, damage reputations and create other types of losses and exposures. Every industry sector is seeing an increasing threat, with the healthcare and education sectors particularly targeted. Other forms of cyberextortion -- including threats to obtain or release protected information, such as personally identifiable customer data, protected health information and confidential corporate information, or to discharge denial-of-service attacks that disrupt an organization’s networks, causing business interruption -- also entail significant potential exposure to organizations. See also: The Growing Problem of Ransomware Here we offer five insurance and other considerations for organizations to consider in the face of an enormous uptick in increasingly severe ransomware attacks and other forms of cyberextortion: 1. Consider purchasing “cyberextortion” insurance. No firewall is unbreachable, and no security system impenetrable. In the context of this reality, insurance can play a vital role in a company’s overall strategy to address, mitigate and maximize protection against the legal and other exposures flowing from serious cybersecurity, privacy and data protection-related incidents. Importantly, almost all stand-alone so-called “cyber” insurance policies offer coverage for ransomware and other forms of cyberextortion. This type of coverage is specifically designed to cover losses and expenses that an organization incurs in the wake of a cyberextortion incident like the WannaCry software virus, together with myriad other forms of first and third-party cybersecurity and data privacy-related exposures, including coverage for crisis management (such as notification to potentially affected individuals, credit monitoring and call center services), data breach and network security-related claims and liability, including regulatory liability, business income loss, and digital asset loss. Cyberextortion coverage can be extremely valuable as a way for organizations to address and mitigate losses arising from mounting extortion threats, and many organizations now purchase this coverage as part of their cyberinsurance programs. 2. Closely review cyberextortion insurance terms and conditions. It is clear that cyberinsurance can be extremely valuable, but obtaining the right insurance product presents significant challenges. There is a diverse and growing array of cyberinsurance products in the marketplace, each with its own insurer-drafted terms and conditions that vary dramatically from insurer to insurer — and even between cyberinsurance policies underwritten by the same insurer. In addition, the specific needs of different industry sectors, and different organizations within those sectors, are far-reaching and diverse. For these reasons, organizations purchasing cyberinsurance, and the cyberextortion components of that insurance, are well advised to closely review the terms and conditions of the coverage to ensure that the organization’s cyber extortion risk will be covered, without a protracted battle with the insurer, in the wake of an attack. Among other things, organizations are advised to consider the following:

• Scope of coverage. Cyberextortion coverage should be written to cover as broad a range of potential attacks, and potential exposure outcomes, as possible. The coverage should include any threat to harm, impair access to or engage in unauthorized access to, relevant computer systems and the applications, files and data residing on those systems, together with any threat to access or divulge any sensitive information in the organization’s possession or control.
• Key definitions. Key definitions must be sufficiently broad to match the reality of risk faced by the insured organization. By way of example, in addition to definitions that define the scope of coverage, definitions governing the types of losses and expenses that are covered should be carefully reviewed. The policy should cover reasonable and necessary expenses incurred by the insured organization resulting from a covered threat, including the costs of investigating and assessing a threat (even if no ransom is paid), should expressly cover payment of cryptocurrencies (including Bitcoin), as well as, preferably, any other consideration or action that may be demanded by the extortionists, and should cover reasonable and necessary expenses incurred to mitigate or reduce other covered expenses.
• Conditions. Organizations are advised to pay close attention to policy conditions, including notice and consent provisions, proof of loss provisions, allocation provisions, alternative dispute resolution provisions and any requirements that the organization notify law enforcement of the incident at issue. The importance of notice provisions is addressed in further detail below. Consent provisions may be favorably amended to state that an insurer’s consent to satisfying the extortion demand “shall not be unreasonably withheld.” Other provisions, such as the requirement of involving authorities, may be deleted. As discussed more below, cyberinsurance policies are highly negotiable, and very favorable amendments can often be made for no additional premium charge.
• Exclusions. It also is critical that organizations be aware of any insurance policy exclusions that may vitiate the coverage that the policy was intended to cover. By way of example, cyberinsurance policies typically contain a “bodily injury” exclusion. Such an exclusion may pose a particular problem for hospitals and other healthcare providers, which rely on access to patients’ medical records to provide appropriate care and treatment. As with other exclusions, it may be possible to significantly curtail or delete bodily injury exclusions. Many other types of exclusions can be curtailed or deleted — often for no additional policy premium.
• Sublimits and retentions. It is clearly important that a cyberinsurance sublimit of liability (a ceiling on the amount of coverage available to cover a specific type of loss at issue) be sufficient to cover the organization’s potential exposure. Like other facets of cyberinsurance coverage, including coverage for losses associated with regulatory action and PCI DSS-related liabilities, cyberextortion coverage may be written subject to a relatively low sublimit, such that, for example, a $10 million limit primary policy may provide only $250,000 or $500,000 for cyberextortion losses. In addition to policy limits, organizations are advised to pay attention to self-insurance features, such as policy retentions or deductibles, which typically range from $0 to in excess of $5 million. As with the case of other cyberinsurance terms and conditions, sublimits and retentions usually are negotiable. On a related point, as discussed further below, what starts with an extortion threat can end up triggering many different modular aspects of cyberinsurance coverage. It, therefore, is important that the policy contain a provision stating that an extortion threat, together with any other first- or third-party covered events that trigger different coverage sections of a policy, are subject only to a single retention, and that any lower retention amount applicable to a particular coverage section, such as a cyber extortion section, is met when that lower retention amount is satisfied by payment of loss under that coverage section.

Although placing coverage in this dynamic space presents a challenge, it also presents substantial opportunity. The cyberinsurance market is competitive, and cyberinsurance policies are highly negotiable. This means that the terms of the insurers’ off-the-shelf policy forms often can be significantly enhanced and customized to respond to the insured’s particular circumstances. Frequently, very significant enhancements can be achieved for no increase in premium. Before an attack occurs, organizations are encouraged to negotiate and place the best possible coverage to decrease the likelihood of a coverage denial and litigation. A well-drafted policy will reduce the likelihood that an insurer will be able to successfully avoid or limit insurance coverage in the event of a claim. 3. Provide notice and comply with other policy conditions. Insurance policies typically contain notification provisions stating that the insured organization must provide notice within a certain time frame, often “as soon as practicable,” even “immediately,” after the organization becomes aware of an incident. Although providing notice to an insurer may not be top of mind in a cyberattack, particularly where the demand is far below the policy retention or deductible, it is important for an organization to reasonably comply with notice provisions (and other policy conditions, including consent provisions) to not jeopardize, or delay, coverage. In the context of providing notice, moreover, it is important for organizations to recognize that what begins as a relatively low cyberextortion demand may quickly evolve into an incident or series of related events that triggers other first-party coverage sections of the insurance policy, such as the business income loss coverage (an extortion event may result in a significant loss of business income), extra expense coverage, digital asset loss recover/restoration coverage and crisis management coverage and, to the extent personally identifiable information or protected health information may have been compromised, for example, the third-party claim coverage sections of the policy, including coverage for data breach-related lawsuits and regulatory liability. Indeed, a ransom demand may be deployed as a purposeful diversion from a different, principal goal, such as stealing sensitive records. Recognizing this reality, it is important that the organization be aware of, and reasonably comply with, notice provisions to avoid a coverage defense based on purported late notice. In addition, providing notification can provide the insured organization with valuable coverage for costs related to the extortion threat, such as a forensics investigation, which may reveal other malware on the computer system, stop the intrusion and block future extortion attempts, a consultant to utilize decryption keys or to recreate the files and data at issue, and, where appropriate, legal counsel. The bottom line: In the event of a cyberextortion demand, organizations are advised to provide notice under all potentially implicated policies, excepting in particular circumstances that may justify refraining to do so, and to carefully evaluate all potentially applicable coverages. 4. Maximize coverage across the entire insurance program. Although cyberextortion coverage is an obvious place to look for coverage in the wake of a ransomware attack or other cyberextortion incident, organizations are advised to consider all potentially applicable insurance policies and coverages. As noted above, a cyberextortion incident may trigger various other coverages under the organization’s cyberinsurance program, and also may trigger other insurance policies and programs, such as computer crime policies and kidnap and ransom policies. The various types of insurance policies that may be triggered by a cyberattack likely carry different insurance limits, deductibles, retentions and other self- insurance features, together with various different and potentially conflicting provisions addressing, for example, other insurance, erosion of self-insurance and stacking of limits. For this reason, in addition to considering the scope of substantive coverage under an insured’s different policies, it is important to carefully consider the best strategy for pursuing coverage in a manner that will most effectively and efficiently maximize the potentially available coverage across the insured’s entire insurance portfolio. Absent a compelling reason, notice should be provided under all policies that potentially provide coverage. 5. Exercise business continuity and improve computer security. Insurance aside, the best protection against a ransomware attack is to have all files and data securely backed up, in a separate physical location, or at least on a separate system, so that no business-critical information that is not recoverable may be permanently deleted by extortionists. It also is important to reflect on how these types of attacks occur. Cyberextortionists must download malicious software onto a system, or a connected device, and this often is achieved through tricking employees to click on attachments or links in phishing emails, which increasingly look convincing. Therefore, improving computer security, including through antivirus programs, spam filters, firewalls, installation of software updates and security patches (early reports indicate that WannaCry appears to exploit a vulnerability in Windows that Microsoft patched on March 14, which would have automatically protected those computers with Windows Update enabled), disabling of macro scripts and using application whitelists, which only allow approved files to execute, is essential. Likewise, training employees about how to recognize and avoid social engineering exploits such as phishing emails, is key in negating or minimizing ransomware threats. Organizations also are advised to consider incorporating ransomware attack scenarios into their incident response planning. See also: Ransomware: Your Money or Your Data! A well-negotiated insurance program, together with solid business continuity planning and comprehensive, active cybersecurity policies and procedures, will position an organization to be resilient in the face of the serious and escalating threat posed by cyberextortion. This article originally appeared on Law 360.

The direct channel has a major impact on the distribution landscape, as customers become the focal point for every transaction and sale. More agents consider the market shift toward online or direct sales a major constraint in the growth of their business. EY recently surveyed 530 P&C and life insurance agents to better understand trends, growth strategies and ways in which engagement rules have changed. They were asked about carrier selection, support and perceived value, as well as future growth engines and how they see their role as agents evolving in three to five years.

Four key themes emerged from this survey.

1. The threat of direct-to-consumer and digital business models is driving insurance agents’ desire to use digital and social sales tools.

Agents are concerned with how they fit into the trend of more direct-to-consumer and online insurance models. Most view the market shift to direct-to-consumer and online channels as the major constraint in the growth of their business going forward. Inadequate products, investment in analytics, administration and automation, and speed and quality of access to customer or policy data also are constraining growth.

Agent perceptions of carriers

While carriers begin to explore alternative distribution platforms, agents still believe they add value and want to be actively engaged with the customer. Survey findings reveal that agents who sell commercial insurance understand the most about how they fit into their carrier’s strategy, while those who sell personal lines and life insurance understand the least.

Growth is a major concern

The landscape of consumers is rapidly evolving from “traditionalists” to “technologists.” Millennials are the largest customer group in history -- and a target growth area for most industries, including insurance. Agents indicated that they need different tools and products to meet their needs and to capture this growth. Agents currently value basic functionality (e.g., operations and sales); however, the agent of the future will be concerned more with digital capabilities and tools. Quality of tools plays a large factor in the decision-making process.

See also: How to Support the Agent of the Future  

2. Agents expect carriers to enable simple customer and agent experiences, which, in turn, will drive agent loyalty. 

Today, 90% of agents tap into multiple carriers, which is forcing insurance providers to rethink their value proposition and ability to differentiate. Personal P&C agents are more likely to have two to five most-favored carriers, while those in commercial lines tend to favor one or two carriers for each product. Only 12% have one primary alliance carrier.

Agents need support from carriers

When asked what carriers could do to ease the operational burden on an agency, respondents universally identified better communication, improved customer service and underwriting. Agents think simplicity is the key for carriers to improve the customer experience. Across product types, agents have different opinions of what carriers can do to improve their responsiveness to customer service or claims; 45% want fewer forms and less paperwork, while 35% propose simpler products and better customer online tools.

Better sales tools, technology and analytics

Life agents are more focused on systems that support new leads and better underwriting, representing an opportunity for improvement. While 65% of commercial and P&C agents rate current tools as very good or good, only 45% of life agents rank them as such. The larger the agency, the higher the quality rating.

3. The agent of the future is looking for innovative, customized products to meet changing market and customer demands.

Innovation will require product change

Product innovation will be a key driving factor behind the agent of the future’s expanded basket of products. All agents place significant value on innovation that facilitates new business. Nearly half of commercial agents perceive technology that automatically identifies potential opportunities within their existing book of business as highly important. The majority of agents believe that carriers could be more innovative by producing more simplified products that require less explanation and better address the needs of millennials. Only one third view the needs of Gen-X’ers and baby boomers as the type of product innovation that will help them grow their business.

Wearables and new technology present opportunities

Technology is viewed as an important factor in addressing the needs of a new generation of agents – and adding millennials to the salesforce will better cater to that market. As millennials continue to represent more market share, almost 40% of agents question their preparedness to meet the needs of the next generation.

4. Agents see close collaboration with carriers as driving growth.

Agents want to be more involved in the underwriting process. They agree that carriers could improve underwriting interaction by allowing more access to underwriters, enabling agents to work with the same underwriters and shifting underwriters’ transactional role to a relationship-focused engineer of customer solutions.

Agents seek closer working relationships with carriers

The majority of agents are open to the idea of reducing their role in servicing to focus on sales and growth. Across all product types, nearly half of agents view increased customization as one of the main product changes to address future needs. In line with customization, 40% of agents view the ability to provide many available features to address a wide set of needs as key to meeting evolving market demand.

Improving the agent experience

Strengthening current customer relationships and achieving customer-centricity in core operations have become strategic imperatives. As consumers embrace digital and other emerging technologies, insurers must rethink their distribution strategies, agency interactions and partner relationships.

See also: The New Agent-Customer Relationship  

Conclusion

Listening to the “voice of the agent” can help carriers provide a deeper, more robust experience and support them to rethink their commitment to the agency system. A collaborative process will allow carriers and agents to interact and strengthen their relationship. Our survey supports the concept that insurers and the agent of the future will be stronger by working together.

Technological innovation has the potential to change any industry for the better, and major technological developments in the last decade or so are creating exciting opportunities in insurance. Here are some of the top ways that insurance can leverage digital technological innovation. 1. Advanced Data Collection From wearable technology, to devices you can put in your car to monitor your driving habits, all of these innovations can provide insurance companies with highly useful data for their policyholders. Smartwatches alone can provide a large amount of beneficial data. For example, the Apple watch can track all of the following; heart rate, activity levels, steps taken, calories burned, movement, among others. Technological breakthroughs are making it easier for insurance companies to gather critical data. Being able to access large amounts of data can help insurers to create better policies, identify their lowest-risk policyholders and obtain alerts when policyholders are at risk for certain types of loss. See also: The Key to Digital Innovation Success   2. New Types of Insurance All of the advances in technology have led to many companies becoming increasingly reliant on their tech infrastructures. Also, increased dependence on technology has created a heightened need for data to be protected. Massive losses can be incurred by companies that have their sensitive data breached. The result is that “cyber insurance” is becoming increasingly popular. Almost 10% of companies now have cyber insurance. This number is likely to increase as more insurers begin to offer this type of coverage, and more companies realize that they need it. In fact, within a few years, cyber insurance could be as common as property insurance or liability insurance for businesses. 3. Increased Personalization Many insurtech companies are now making it possible for customers to engage with their insurance companies through various types of apps. These apps allow policyholders to set up profiles and indicate their preferences for service offerings. Customers can even choose to connect with their insurance companies on various social media outlets if they want to. And, because 47% of millennials report being influenced by social media when it comes to making purchases, this is a good thing. Personalization can be beneficial when it comes to improving customer experience, and helping customers to enjoy their interactions with their insurance company. In this sense, mobile innovations are making personalization easier by connecting policyholders with insurers directly on their smartphones. Final Thoughts Technological innovation in insurtech, wearable devices, data, apps, mobile devices, computers and many more areas all have a strong impact on the insurance industry. The time from the start of the new millennium until the present day has brought many of these new technological innovations. Some insurance companies may hesitate to take advantage of new technology because of a fear of change. However, there are incredible opportunities out there. Advanced data collection, new types of insurance and increased personalization are only a few of the ways that insurers can leverage digital technology innovation to become more profitable. See also: ‘Digital’ Needs a Personal Touch   As technology continues to advance, even more opportunities will become available.