In an April 14 LinkedIn Pulse post, I quoted an excerpt from Seth Godin’s blog that was related to the issue of online insurance buying. I got so much response to that LinkedIn posting excerpt that I asked, and received, Seth’s permission to reprint it here in its entirety. You’ll find it below. More recently, he blogged about “When Time Catches Up.” Here is an excerpt from that post: Bad decisions happen for one of two reasons:

1. You’re in a huge hurry, and you can’t process all the incoming properly. But more common…
2. The repercussions of your decision won’t happen for months or years. This is why we don’t save for retirement, don’t pay attention to long-term environmental issues and, tragically, tolerate (or fall prey to) irrational rants about things like vaccines. It might be engaging or soothing to promote a palliative idea now, but years later, when innocent kids are sick and dying, the regrets are real.

A bad decision isn’t only bad because we’re uninformed or dumb. It can be bad because we are swayed by short-term comfort and ignore long-term implications. A bad decision feels good in the short run, the heartfelt decision of someone who means well. But there’s a gap when we get to the long run. This is related to what many of the insurtech start-ups refer to as the “customer experience.” Their solution for what can be a painful process (purchasing insurance) is to just reduce it to a phone app with a two- to three-minute processing time. The problem is, as Seth puts it, we are often swayed by short-term comfort and ignore long-term implications. As an insurance professional, your responsibility is to educate consumers that shortcuts like this can result in financial disaster if they do not take the time to ascertain their exposures to loss and address them. See also: Smart Things and the Customer Experience   Seth characterizes himself as someone who “writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything.” I find that much of what he blogs about can be applied to our industry. If you don’t subscribe to Seth’s daily blog, I encourage you to do so. It is almost always interesting and often very insightful. Now, on with the original blog post I mentioned at the start above…. ‘Sort by price’ is lazy, by Seth Godin Sort by price is the dominant way that shopping online now happens. The cheapest airline ticket or widget or freelancer comes up first, and most people click. It’s a great shortcut for a programmer, of course, because the price is a number, and it’s easy to sort. Alphabetical could work even more easily, but it seems less relevant (especially if you’re a fan of Zappos or Zima). The problem: Just because it’s easy doesn’t mean it’s as useful as it appears. It’s lazy for the consumer. If you can’t take the time to learn about your options, about quality, about side effects, then it seems like buying the cheapest is the way to go–they’re all the same anyway, we think. And it’s easy for the producer. Nothing is easier to improve than price. It takes no nuance, no long-term thinking, no concern about externalities. Just become more brutal with your suppliers and customers, and cut every corner you can. And then blame the system. The merchandisers and buyers at Wal-Mart were lazy. They didn’t have to spend much time figuring out if something was better, they were merely focused on price, regardless of what it cost their community in the long run. We’re part of that system, and if we’re not happy with the way we’re treated, we ought to think about the system we’ve permitted to drive those changes. What would happen if we insisted on ‘sort by delight’ instead? What if the airline search engines returned results sorted by a (certainly difficult) score that combined travel time, aircraft quality, reliability, customer service, price and a few other factors? How would that change the experience of flying? This extends far beyond air travel. We understand that it makes no sense to hire someone merely because they charge the cheapest wage. That we shouldn’t pick a book or a movie or a restaurant simply because it costs the least. There are differences, and, sometimes, those differences are worth what they cost. See also: Key Trends in Innovation (Part 3)   ‘Worth it’ is a fine goal. What if, before we rushed to sort at all, we decided what was worth sorting for? Low price is the last refuge of the marketer who doesn’t care enough to build something worth paying for. In your experience, how often is the cheapest choice the best choice?

More than ever, chief security officers are being held accountable for keeping their businesses safe. Phishing attacks, data breaches, ransomware and the ever-increasing access by employees to technology and data are driving this accountability. But there’s only so much that technology solutions can do to protect against threats. What else should organizations do? It turns out that most breaches are the result of an employee mistake, so looking to their staff as their first line of protection is a critical success factor today. Security awareness training is now recognized as one of the critical components of a robust security architecture. But are employees getting the security awareness training they need and deserve? Unfortunately not. Too many organizations still choose to provide no security awareness training at all, or simply provide annual PowerPoint-based training program, or training that is dry and difficult to understand. See also: Quest for Reliable Cyber Security   Employees often think they’re prepared or think, “That’ll never happen to me” — until it does. Then the employee often is too ashamed to go to a boss or IT department after an incident occurs. Traditional training doesn’t work The information and best practices the employee received from training were never understood, didn’t seem relevant or just didn’t come back to him. What happened? Cyber attacks aren’t changing every five years — it’s more like every five months. Organizations can’t afford to fall behind on security training. Employees must be armed with the knowledge and skills to protect themselves and their organizations. Traditional, outdated training does little to prepare workers for the deluge of cyber attacks they face or the risks they create for themselves. There are ways to make a change in the workplace. Instead of training employees as passive observers, make training interactive and teach actionable, real-world skills. Recognize that hacks happen Instead of instilling a mindset that an incident must never happen, give employees the confidence to speak up, even if they make a mistake. Instead of focusing solely on security, focus on learning, too. Make training brief, fun and sticky so that it is always top-of-mind when needed. Instead of focusing on a single type of risk, prepare employees for the range of security threats they’ll face, whether from an external cyber attack or from their own use of technology or access to data. See also: Cybersecurity: Firms Are Just Sloppy   Hacks can happen even if the staff practices security procedures. Look at the victims of the Twitter Counter breach. No actual Twitter accounts were hacked, but a third-party application was, and the hackers left unnerving tweets on organizations’ accounts. Employees should be prepared for events like this. Practicing real-world scenarios can help prepare for the worst-case events. Training needs to keep up with the technology that employees are using and the risks they face. It’s time to stop using outdated training techniques and for organizations to invest in their employees and assets by providing security training that will make a difference and change the behavior of its staff. They can’t afford not to. This article originally appeared on ThirdCertainty. It was written by Marie White.

I’ve often thought the most valuable interactions happen with the people at the edge of our networks. The people we meet serendipitously, through our more distant contacts. It’s here, on the edge, where the sparks of creativity really fly. Recently, I’ve been putting this theory to the test by taking the time to meet face-to-face with people I might more usually only connect with by email or LinkedIn. It’s a refreshing experience. One of the many benefits is frequent exposure to new ideas and new ways of thinking from people who view the world through a different lens. There are other benefits, such as getting to see the new musical “Bat Out of Hell” in the company of an American lawyer. But I digress ... It’s not just people who benefit from networking at the edge. Computers do, too, and there’s an interesting analogy to be drawn here with the emerging importance of edge computing. This is where processing and data are placed at the edge of our networks to have the maximum effect. Let me explain. Over the last decade or so, we’ve seen processing and data increasingly centralized in the cloud. This has been driven partly by the cost-effectiveness and scalability of cloud computing and partly by the growth of big data. Amazon Alexa is an excellent example of how this works. Voice commands are picked up by an Amazon Echo device, converted from speech to text and fired off to the cloud where natural language processing (NLP) and clever software are used to interpret and fulfill your requests. The results are served back to your Echo in less than half a second. Very little processing takes place on the Echo, and very little data is stored there; all the heavy lifting is done centrally in the cloud. See also: The Big Lesson From Amazon-Whole Foods   This model works well if the edge device (the Echo) is always connected to the cloud via the internet, the arrival rate of new data (your voice commands) is relatively low and the response time is not critical (we’re happy to wait half a second for Ed Sheeran to start his next song). But it doesn’t work so well if the edge device is not always connected, if the volume of real-time data streaming into the device is huge or if an instant response is needed. Imagine you’re being driven to the theater by your AI-controlled smart car equipped with hundreds of sensors gathering real-time data from every direction. If the sensors detect a child running out in front of the car, there’s no point firing that data off to the cloud for processing. It has to be processed and acted on instantly and locally by the car itself. There are many, many more examples where the edge devices (cars, traffic lights, fitness bracelets, microwaves, safety critical sensors on assembly lines… in fact, very many of the billions of devices that will be connected to the internet of things over the coming years) will need the ability to process their own real-time data. These edge computing devices will still connect to the cloud, but the location of the processing and the data will vary according to need — in the cloud for asynchronous machine learning insights and improvements; at the edge for real-time processing of real-time data streams to determine real-time actions. Developing the hardware and software for these devices will require new ways of thinking. It’s not about big data; it’s about small, fast data. And I’m sure we’re going to see dramatic improvements in battery efficiency, data storage and processing capability of these intelligent edge computing devices. The Internet of Things is actually going to become the Internet of Small Powerful Intelligent Things (although I doubt that acronym will catch on). See also: Major Opportunities in Microinsurance   Most interestingly of all, though, from a cultural and business perspective, is the innovation this edge computing will enable, such as:

• The insurance industry will be able to offer better deals and new types of policies driven by the intelligence embedded in the insured assets.
• The health industry will be able to provide preventative care supported by intelligent wearables monitoring everything from activity to blood sugar levels.
• The entertainment industry will be able to deliver interactive content without those annoying buffers and whirling circles.

And, who knows, maybe edge computing will also help us communicate more effectively with each other. Because spending time at the edge of our networks, as I have been discovering, is where the sparks of creativity really fly. Like the musical “Bat Out of Hell,” it’s one experience I can thoroughly recommend!

According to a recent survey of U.S. consumers, more than 32% of all respondents—and 50% of those aged 18–25—said they prefer to work directly with insurance carriers. We are also experiencing rapid changes in the amount of data that insurers are gathering and analyzing: The number of internet-connected devices and sensors is projected to reach 50 billion by 2020, providing real-time information that insurers can use for better pricing/underwriting. Meanwhile, drones are expected to have a $6.8 billion impact on the insurance industry. See also: Drones Reducing Accidents on Job   As a drone enthusiast myself, I’ve been lucky to use my drone to capture aerial imagery—footage I was unable to take a few short years ago. This is but one of the copious amounts of types of data unmanned aerial vehicles (UAVs) can obtain to support the insurance industry. Accordingly, I curated a list of the top five ways drones are affecting the insurance industry. 1. Drones already play an important part in the insurance claims process Customer experience is paramount, and the ability to shorten the claims timeframe is crucial. Today, one claims adjuster on-site and equipped with a drone can set up an automated flight plan around multiple insured locations; evaluate the properties using sensors; and capture images. According to Cognizant, drone usage is predicted to make claims adjusters’ workflow 40% to 50% more efficient. Drones can improve the speed with which customers receive settlements and give claims managers  a better sense of where and how many staff should be deployed. There is also less risk for claims adjusters, who no longer need to climb ladders or go on roofs to assess damage. 2. More precise risk management and tailored pricing Drones can be used to collect information about a property before a policy is issued, by capturing data on property features that make it less vulnerable, such as storm shutters. The data can facilitate personalized premiums. After all, insurance is all about measuring risk and accurately pricing it. 3. Better data, better catastrophe models Aerial imagery taken by drones enhances data for catastrophe model components and provides inputs for analysis. As discussed in this blog post, for catastrophe model developers and users there is mutually beneficial interplay between model development, engineering analysis and exposure and claims data quality. Improving the feedback loop between underwriters, claims adjusters and model validation can substantially increase a cat model’s performance in quantifying risk. 4. Lower losses from fraud According to the Insurance Information Institute, fraud accounts for about 10% of property and casualty insurance losses and loss adjustment expenses, which translates to about $32 billion each year. In addition, 57% of insurers predict an increase in this type of fraud by policyholders. How can drones help? After an extreme event, it is common for insurance companies to receive numerous claims for damages that existed before the event occurred. By using UAVs prior to an extreme event to capture images of insured properties, companies can protect themselves from such fraudulent claims. 5. Drones and artificial intelligence come together Artificial intelligence (AI) integrated with drones will allow for more independent functionality. IBM’s AI system, Watson, is able to automatically process aerial imagery, assess hail damage and calculate damage extent. Drones integrated with AI will provide an end-to-end solution that will allow for an expedited claims process, reduction in costs and increase in customer satisfaction. See also: What Is the Future for Drones?   An extreme event can devastate a region and affect thousands of lives. For the insurers and people affected, timing is everything. Organizations need to dedicate resources immediately, effectively and efficiently to help get communities and businesses back on their feet. In this era of rapid technological advancement, drones are one of the many new tools with which life, business and the global economy are being transformed.

Despite a generally soft market for traditional P&C products, the fact that so many industries and the businesses within them are being reshaped by technology is creating opportunities (and more challenges). Consider insurers with personal and commercial auto. Pundits are predicting a rapid decline in personal auto premiums and questioning the viability of both personal and commercial auto due to the emergence of autonomous technologies and driverless vehicles, as well as the increasing use of alternative options (ride-sharing, public transportation, etc.). Finding alternative growth strategies is “top of mind” for CEOs.  Opportunities can be captured from the change within commercial and specialty insurance. New risks, new markets, new customers and the demand for new products and services may fill the gaps for those who are prepared. Our new research, A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption, highlights how changing trends in demographics, customer behaviors, technology, data and market boundaries are creating a dramatic shift from traditional commercial and specialty products to the new, post-digital age products redefining the market of the future. See also: Insurtechs Are Pushing for Transparency Growth Opportunities New technologies, demographics, behaviors and more will fuel the growth of new businesses and industries over the next 10 years. Commercial and specialty insurance provides a critical role to these businesses and the economy — protecting them from failure by assuming the risks inherent in their transformation. Industry statistics for the “traditional” commercial marketplace don’t yet reflect the potential growth from these new markets. The Insurance Information Institute expects overall personal and commercial exposures to increase between 4% and 4.5% in 2017 but cautioned that continued soft rates in commercial lines could cause overall P&C premium growth to lag behind economic growth. But a diverse group of customers will increasingly create narrow segments that will demand niche, personalized products and services. Many do not fit neatly within pre-defined categories of risk and products for insur­ance, creating opportunities for new products and services. Small and medium businesses are at the forefront of this change and at the center of business creation, business transformation and growth in the economy.

• By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen Xers — two groups that prefer to do as much as possible digitally. Furthermore, their views, behaviors and expectations are different than those of previous generations and will be influenced by their personal digital experiences.
• The sharing/gig/on-demand economy is an example of the significant digitally enabled changes in people’s behaviors and expectations that are redefining the nature of work, business models and risk profiles.
• The rapid emergence of technologies and the explosion of data are combining to create a magnified impact. Technology and data are making it easier and more profitable to reach, underwrite and service commercial and specialty market segments. In particular, insurers can narrow and specialize various segments into new niches. In addition, the combination of technology and data is disrupting other industries, changing existing business models and creating businesses and risks that need new types of insurance.
• New products can be deployed on demand, and industry boundaries are blurring. Traditional insurance or new forms of insurance may be embedded in the purchase of products and services.

Insurtech is re-shaping this new digital world and disrupting the traditional insurance value chain for commercial and specialty insurance, leading to specialty protection for a new era of business. Consider insurtech startups like Embroker, Next Insurance, Ask Kodiak, CoverWallet, Splice and others. Not being left behind, traditional insurers are creating innovative business models for commercial and specialty insurance, like Berkshire Hathaway with biBERK for direct to small business owners; Hiscox, which offers small business insurance (SBI) products directly from its website; or American Family, which invested in AssureStart, now part of Homesite, a direct writer of SBI. The Domino Effect We all likely played with dominoes in our childhood, setting them up in a row and seeing how we could orchestrate a chain reaction. Now, as adults, we are seeing and playing with dominoes at a much higher level. Every business has been or likely will be affected by a domino effect. What is different in today’s business era, as opposed to even a decade ago, is that disruption in one industry has a much broader ripple effect that disrupts the risk landscape of multiple other industries and creates additional risks. We are compelled to watch the chains created from inside and outside of insurance. Recognizing that this domino effect occurs is critical to developing appropriate new product plans that align to these shifts. Just consider the following disrupted industries and then think about the disrupters and their casualties: taxis and ridesharing (Lyft, Uber), movie rentals (Blockbuster) and streaming video (NetFlix), traditional retail (Sears and Macy's) and online retail, enterprise systems (Siebel, Oracle) and cloud platforms (Salesforce and Workday), and book stores (Borders) and Amazon. Consider the continuing impact of Amazon, with the announcement about acquiring Whole Foods and the significant drop in stock prices for traditional grocers. Many analysts noted that this is a game changer with massive innovative opportunities. The transportation industry is at the front end of a massive domino-toppling event. A report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, says that by 2030 (within 10 years of regulatory approval of autonomous vehicles (AVs)), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model called “transportation-as-a-service” (TaaS). The TaaS disruption will have enormous implications across the automotive industry, but also many other industries, including public transportation, oil, auto repair shops and gas stations. The result is that not just one industry could be disrupted … many could be affected by just one domino … autonomous vehicles. Auto insurance is in this chain of disruption. See also: Leveraging AI in Commercial Insurance   And commercial insurance, because it is used by all businesses to provide risk protection, is also in the chain of all those businesses affected – a decline in number of businesses, decline in risk products needed and decline in revenue. The domino effect will decimate traditional business, product and revenue models, while creating growth opportunities for those bold enough to begin preparing for it today with different risk products. Transformation + Creativity = Opportunity Opportunity in insurance starts with transformation. New technologies will be enablers on the path to innovative ideas. As the new age of insurance unfolds, insurers must recommit to their business transformation journey and avoid falling into an operational trap or resorting to traditional thinking. In this changing insurance market, new competitors don’t play by the rules of the past. Insurers need to be a part of rewriting the rules for the future, because there is less risk when you write the new rules. One of those rules is diversification. Diversification is about building new products, exploring new markets and taking new risks. The cost of ignoring this can be brutal. Insurers that can see the change and opportunity for commercial and specialty lines will set themselves apart from those that do not. For a greater in-depth look at the implications of commercial insurance shifts, be sure to download, A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption.

Consumers are price-shopping insurance policies online in record numbers. According to 2017 JD Power research, the importance of price has surpassed that of a good past service experience when a shopper considers or quotes a brand. Though increasing price commoditization presents an enormous challenge for insurance agencies, our newest sales lead response research provides some hope. With so many insurance organizations falling short on sales lead response best practices, there is a major opportunity for agencies, regardless of size or type, to stand out from the competition and win new policyholders. The Impact of a Winning First Impression The first impression an agency gives a potential customer is very important – not only how quickly they follow up, but also what they say. Most potential customers see this first interaction as a leading indicator of a longer-term relationship with the agency. Effective follow-up that is timely, appropriately persistent, with a message that adds value for the recipient can increase the chance of conversion. Research shows that:

• Calling a lead within one minute of an inquiry more than doubles conversion rates.
• Leads who are left two voicemails on six missed calls are 34% more likely to convert than leads who don’t receive any voicemails at all.

Insurance agencies may be under the impression that their contact strategies and specifically their lead response efforts are timely and effective, but Velocify analysis of actual calls, voicemails and emails shows that, for many of them, sales response tactics are more likely to be in need of an overhaul. See also: 3 Great Apps for Insurance Agents   Here are some pro tips to help improve call and voicemail performance shortcomings identified in the Sales Lead Response: The Ugly Truth Behind Call, Voicemail, and Email Practices study. Call and Voicemail Timing and Cadence While there is no optimal, magic time of day to make a call, following up quickly and then at strategic intervals can improve outcomes. Our analysis showed that sales professionals are often miscalculating when it comes to the most effective communication cadence -- the right number and timing of phone calls and voicemails. Calling a lead within one minute of an inquiry more than doubles conversion rates, but only 7% of the prospects in the study received a call within one minute. Almost half of all prospects submitted didn’t even receive a voicemail. Of those who did, 40% received only one voicemail, and 34% received too many. One prospect even received 10 voicemails. PRO TIP: Velocify’s six-call strategy suggests leaving a voicemail on the second and fourth call attempt. Leaving the first voicemail on the second call results in a 31% higher conversion rate than leaving that voicemail on any other call. It’s important to weave voicemails into a company’s call strategy because missed calls can go unnoticed, and a voicemail is a good way to get a prospect’s attention. However, producers need to make sure to strike the right balance because research shows leaving too many voicemails before contact, as many as five or more, can actually be worse than not leaving any voicemails. The Impact of Message Quality Voicemail frequency can increase the chance of conversion, but agencies need to leave quality messages to maximize callbacks. Accordingly, the study evaluated voicemail quality on five basic criteria: context; clarity; length; personalization; and tone. Only 18% of prospects received “good” voicemails that included all five. Almost half (46%) of all voicemails were scored “bad to terrible,” meeting three of the five criteria or fewer. On the opposite end of the continuum, 8% of the voicemails received didn’t even meet one of the five criteria. See also: How Life Insurance Agents Can Be Ready   More Effective Phone Skills, Powered by the Right Tech Tools Insurers can avoid inadvertently throwing money away by responding appropriately and learning how to more effectively maximize every prospect interaction. There are a number of technologies and techniques available that help improve process so agencies can more easily and effectively make a better first impression.

I read a comment from a consumer who purchased a renter's policy from a well-known, low-price, direct carrier for $25 a month and got a quote for $5 a month from a well-known, though brand new startup. The consumer asked online of the startup, "Are you real?" One of its executives replied, "Yes, and we can charge so little because of our technology!" (I'm paraphrasing slightly for confidentiality.) That is some kind of technology to legitimately charge 80% less. If the technology is that great, everyone else should just pack up and quit now. But, first, I will go through some simple math. I'll use the incumbent carrier's results using publicly available data. The limitation is that I do not have line-item expense data down to the renter's policy level. This might make a difference, but, because the price difference is 80%, the difference is not material for this explanation. See also: Chasing the Right Numbers on Claims   The incumbent's overall expense ratio excluding loss adjustment is about 14% of written premium. The overall industry average over the last 10 years is 27.1%, and in 2016 it was 27.7%. Expense ratios tend to be stable, stubbornly so when companies need to decrease them. The incumbent's profit margin excluding investment revenue was approximately 5%. Therefore, it pays out approximately 70% of premiums in claims (total industry average for all lines is approximately 59%). This means that, if this carrier had no expenses and no need for profit, it would have to charge $.70 per dollar of premium just to  break even. The new competitor (let's call it "NewCo") is charging approximately 80% less. NewCo is too new to use its actual expenses as comparisons (the profit margin was hugely negative last year, which is normal for a startup, even one with great technology). 80% less, though, is less than the incumbent's expense ratio when loss adjustment expense is included (LAE is approximately 10%). In other words, the incumbent's expense ratio including LAE is approximately 30%, one of the lowest in the industry, and yet NewCo can justify a rate of $.20? To the best of my knowledge, no developed personal lines company has a sub-20% expense ratio including LAE. I suppose that, if everyone worked for free, if reinsurance were free and if the great technology was free, it might be possible. For NewCo's executive to be accurate, its technology must be so good that the great technology, his salary, others' salaries, auditing fees, license fees, all other expenses and all losses must be less than $.20 on the dollar. Is the executive correct? We'll have to wait and see. Giving the startup the benefit of the doubt, the only way a company can make money at 20% is if the technology identifies prospects that will not have claims, except in a highly unlikely scenario, such as maybe Black Swan events. The policy would have to be really a de facto catastrophe policy, even though the insured does not see it as such. Another possibility is that the forms are not comparable, which means NewCo's form is disingenuous or a de facto cat policy from a different angle. Based on the executive's response, though, no indication was made coverage was less, so I'm going to assume the forms are comparable. If I am wrong, a serious disclosure should have been made. I am going to extend the benefit of the doubt further. If NewCo's technology really is that good, to select people highly unlikely to have a claim, then those people do not really need insurance. They are just wasting much less at $60 per year than $300 per year. Going further into the implications for the industry: There have to be clients so unlikely to incur a claim that rates can legitimately be 80% less. The law of large numbers is based on the concept that a company cannot, within reason, predetermine which of 100,000 renters will have a theft or fire. The company can only identify the probable number of claims and the claim dollars it'll incur from these 100,000 renters collectively. If the carrier charges enough for all 100,000 policyholders (law of large numbers) but does not identify specifically who will have a claim because historically (and maybe still today) that is not predictable, then the company can make a small profit. The profit on some clients will be 70%, and on others it will be -1,000%, but, collectively, the underwriting profit will be 5%. If NewCo's executive is correct, what he was really saying is that its technology knows exactly who will have a claim--true predictive modeling down to the individual level. This means the consumers likely to have claims will pay much, much, much more. The carriers and agents stuck with these unfortunate clients will have serious problems, too, because the rates they have to charge may be so high as to be unaffordable. As much as people hate paying premiums that are always too high, historically insurance was egalitarian in many ways because all clients in a pool were treated somewhat equally. See also: How to Make Your Numbers Jump   Of course, NewCo could just be seriously underpricing its product like hundreds of new carriers that have gone before and often failed. Insurance history is littered with the tombstones of carriers that have "figured out something smarter" but were really just underpricing. It would not be the first time, and it will not be the last, where an executive thought the key advantage was technology when, in reality, the carrier did not even possess a competitive advantage. I recently heard another insurance C-suite executive advise that its advantage was technology when a review of its financials suggests it is not even investing in technology beyond some interesting reserving models. There was one other aspect of the web-based conversation between the consumer shopping renters' insurance and NewCo's executive. When asked if the company was real, the executive also advised that NewCo was real because regulators have licensed it. Please understand that, just because regulators have licensed a company, does not always mean much in the real world. I believe that almost all insurance companies that have failed were licensed. For an executive to use this as proof of "being real" causes just a smidgen of skepticism, especially when combined with a need to write to a combined ratio of 20%. The logic doesn't add up.

In 1980, the actor Steve McQueen traveled to Mexico to receive unorthodox (and ultimately futile) cancer treatment. The widespread coverage that McQueen’s trip received in the mainstream press can, of course, be attributed to his celebrity. But it was also because the actor had taken the reins of his healthcare from the medical establishment, something that was seen as brazen. Back in those days, we wouldn’t have used the term “consumerization of healthcare” to describe what McQueen did. However, his approach has become an accelerating trend over the past decade, when Americans have taken more control over their health, and the healthcare experience. Consumers are more informed about choice, more demanding about the services being offered and more focused on how they pay for it. The list of changes is long and growing, focusing on:

• Wellness
• Easily accessible online repositories of medical information and advice
• Medical tourism
• Physician ratings
• Walk-in clinics at stores like Walmart and CVS
• Health spending accounts
• A proliferation of insurance options

As technology advanced, consumerization was enabled, and, as healthcare costs increase, it’s grown in importance. But the question remains: Do consumers have what it takes to control their health and healthcare as they both consume it and pay for it? See also: Healthcare Buyers Need Clearer Choices   What’s driving the consumerization of healthcare? Thanks to the wealth of information available on the internet (product and service details, pricing info, ratings and reviews), consumers have more control over what they spend their money on, and where and how they spend it. Consumerization began with product shopping but quickly moved into the service sector (financial services, travel services, healthcare). Whether consumers are covered by group plans in their workplace or by individual plans, they are paying more for their coverage and experiencing higher out-of-pocket costs. A recent Kaiser Foundation study showed that, from 2015 to 2016, deductibles increased by 12% for those covered by employer-sponsored plans. While deductibles have grown more rapidly than premiums – this is, after all, the tradeoff – premiums have still been rising more rapidly than wages. More now than ever, people are more conscious of what they’re spending. Consumers have become more active Today, consumers are increasingly relying on technology to manage their health. This trend cuts across generations. Baby boomers were perhaps the first truly “health conscious” cohort. Running, as a popular activity, took off on their watch, as did an interest in (and willingness to spend on) healthier foods. At the same time, boomers are focusing on the health and the healthcare experience of their elderly parents. Boomers are taking advantage of monitoring technology that enables them to keep a remote eye on their parents while helping them remain independent. Then, of course, there’s tremendous interest coming from millennials -- digital natives who are used to ubiquitous technology and to shopping around and finding the best deals in all aspects of their lives. Millennials are more likely than boomers and Generation X-ers to own a fitness tracker, search for a physician online and base physician choice on reviews. Millennials are also more likely than other generations to go online and research a medical problem before consulting a physician. Technology, in fact, is bringing about a merger between health and healthcare. When employers are buying Fitbits and sponsoring wellness programs for their workforce, they’re hoping to achieve the dual benefits of healthier employees and more cost-effective healthcare. There is a growing body of evidence that consumers want more active involvement in their healthcare, and the adoption of digital health tools and applications is a good proxy. For the past several years, Rock Health has surveyed consumers on their use of digital health. In a 2016 report, Rock Health found that 46% of those surveyed have adopted three or more forms of digital health tools. They’re using a fitness tracker, engaging in some form of telemedicine or contacting their physician via email or text message. The survey also found that the majority of Americans would like an electronic version of their healthcare record, and that, in the six months prior to the survey, 20% had requested or downloaded a copy. Do consumers have the tools and knowledge to manage cost? Consumers are showing an increasing willingness to take control on the payment end of things. But they may not yet be in a position to do so. Policy Genius, which offers online tools for buying all types of insurance, surveyed consumers on their understanding of some of the basic concepts underlying health insurance. Only 53% picked the right definition of "co-pay." The term "coinsurance" was understood by just 22%. Roughly half couldn’t define "deductible." So, while consumers may express a greater desire to take control of their healthcare, they may lack awareness and understanding of how to best utilize their insurance to pay for it. See also: Consumer-Friendly Healthcare Model   There’s an app for that The good news is that technology applications are making consumer control possible. We’ve already seen plenty of apps that help manage so many aspects of health and the healthcare experience: apps for checking symptoms, chatting with a physician, monitoring medications, tracking vitals and even accessing healthcare records. Applications that focus on the cost and payment side of the equation have been slightly slower in arriving to market, but they are coming. There is an emerging array of insurance-related (insurtech) apps that are making it possible for consumers to gain control of their insurance buying experience, apps that enable them to figure out whether their physicians are part of their network, whether their prescriptions are covered and just what that coinsurance-copay-deductible means to their pocketbook. These insurtech platforms include businesses like GetInsured, which helps individuals purchase the right health insurance plan; apps like Stroll Health, which brings transparency and efficiency to the imaging referral process by delivering personal recommendations based on what is covered by the patient’s insurance plan; and GlucosePath, an app that looks at the 6 million combinations of drugs available to treat Type 2 diabetes to find the regimen that is affordable (based on the patient’s insurance), effective and has the fewest side effects. Given that Steve McQueen was famous and wealthy, he probably wasn’t worried about the cost or payment side of his treatment. But taking control of his own healthcare the way he did may have helped spark a major consumer trend. Today, consumers continue to push for active control in their health and in how they consume and pay for their healthcare. And, through technology, the healthcare industry is inexorably delivering solutions to fill any gaps that keep consumers from exercising even more control.

The downfall of Travis Kalanick should show the world of would-be tech entrepreneurs that they need better role models, that they need to stop looking up to the spoiled brats who lead some of Silicon Valley’s most hyped companies and the investors who fund their misbehavior. Travis Kalanick’s ouster from Uber is literally a watershed for the Valley, something that is capable of shaking up its entrepreneurs and venture capitalists alike. For too long, the elite have gotten away with sexism, ageism and, to coin a word, unethicalism. The cult of the entrepreneur idolized arrogant male founders who plundered money and even sank companies; the more money they raised (and often lost), the higher the valuations their companies received and the more respect they gained. Corporate governance and social responsibility were treated as foreign concepts. Uber was not the worst offender in the tech industry; it was just the most visible and the one that got caught. Its investors have been rightly humiliated for having their heads in the sand. This is because it has for so long been clear that Uber needs management that is more responsible — to its employees, its drivers and its customers. The trouble first surfaced in 2013, when complaints about male drivers’ assaulting female passengers met with denials of responsibility by the company. Then followed sexist “boober” comments by Kalanick; ads in France that pitched attractive female drivers; suggestions by an Uber executive that he would dig up dirt on a journalist; and the rape of a woman passenger in New Delhi partly caused by a lax screening of drivers. See also: What to Learn From Uber’s Recent Troubles   But through all of this, Uber investors supported the company and accepted the ethical lapses as if they hadn’t happened. All that seemed to matter was that valuations were rising; the business, expanding. Who cared that a top Uber executive had secured a copy of the medical report of the Delhi rape victim and shared it with other company executives, including Travis Kalanick, in an attempt to discredit her? The company was growing; investors were valuing it in the billions! Things finally reached a boiling point with a series of allegations by a woman employee about rampant sexism and sexual assault at Uber headquarters. And, fortuitously, a board member illustrated the root of the problem by making a sexist remark at a meeting about eliminating sexism. The board was finally compelled to do something it should have done years ago: force Kalanick out and clean up its act. To be fair, there are many technology companies that are, in this regard, exemplary, including Salesforce, Microsoft and Facebook. They are going to extremes to correct problems that they had found in their ranks. I know from discussions with executives such as Microsoft CEO Satya Nadella that they have been working hard and sincerely. But too many Silicon Valley stars are like Uber. With the help of Arianna Huffington and Eric Holder, the company is at last working on reforming itself. And maybe the downfall of Kalanick will provide not only valuable but lasting lessons for the hotshots of Silicon Valley, and of tech cultures worldwide. If Uber can do it, so can the rest of the Boys Club. They have to realize that press releases won’t suffice, that real change is necessary. Who are “they”? To begin with, the people who fund the offenders, the venture capitalists. They have not been held accountable, and they need to be. The Diana Project at Babson College documented that, as of 2014, 85% of all venture capital-funded businesses had no women on the executive team, and only 2.7% had a woman CEO. The proportion of women partners in venture capital firms had also declined to 6% from 10% in 1999. And this is part of the problem for an obvious reason: Women don’t tolerate boys-will-be-boys behavior, because they aren’t boys. Moreover, as any number of studies have documented, diversity in companies yields a broader range of perspectives on the business itself and, often, better bottom-line results. And, as I have pointed out, high-tech women who are measurably better than men have been consistently discriminated against. Venture capitalists are susceptible to business pressure. The money that they invest is not their own. It is raised from pension funds, universities and state governments. They must require venture capital firms to provide public disclosures about the diversity of the companies they invest in — including the gender and age of the executives. They must have a diverse set of investment partners, without sugarcoating the numbers using inflated titles for junior associates. Next are the boards. Venture capitalists demand seats on boards as a condition for their investment but don’t usually fulfill their fiduciary duty to all shareholders and employees — they always put the interests of their own funds ahead of those of the company. They must take responsibility for the employees as well as for the success of the company, as board members are supposed to do. And startups must have diverse boards that provide balance and broad perspective, not chummy boys clubs dominated by venture capitalists. Finally, all tech companies must take heed of the report that was put together by former Attorney General Eric Holder for Uber. There are obvious procedures to employ in making diversity a priority: such things as blind resume reviews; interviewing at least one woman and one minority candidate for each open position; limiting alcohol at work events and in the office and banning employee-manager relationships. In most industries, discriminating on the basis of gender, race or age would be considered illegal. Yet, in the tech industry, venture capitalists brag about their "pattern recognition” capabilities. They say they can recognize a successful entrepreneur when they see one. The pattern always resembles Mark Zuckerberg, Bill Gates, Jeff Bezos a nerdy male. Women, blacks and Latinos need not apply. Venture capitalists openly admit that they only fund young entrepreneurs because, they claim, older people can’t innovate. See also: A Trip Through Silicon Valley   Silicon Valley got a free pass when computers were just for nerds and hobbyists. Few cared about its arrogance and insularity, because its companies were building products for people who looked just like their founders. And these child geniuses inspired so much awe that their frat-boy behavior was a topic of amusement. But now technology is everywhere; it is the underpinning of our economic growth. What is more, the public is investing billions of dollars in tech companies and expects professionalism, maturity and corporate social responsibility. There is no free pass for the tech industry anymore. It must grow up and clean house.

The avalanche of news from "industry-transforming" insurtech startups continues. Here are some of the latest: Headline: Aviva to Slash Prices with "Game-Changing" Concept Concept: To sell insurance without asking applicants any questions. Quote: “What’s our long-term goal? To go from Ask it Once to Ask it Never – so customers don’t have to answer any questions at all.” Observation: How about a long-term goal of protecting individuals and families from catastrophic financial ruin? I just had my annual physical. My doctor said his new concept was to not ask me any questions and to get me in and out of his office in two to three minutes. That’s the kind of “customer experience” I want when my life is on the line. How about you? Headline: “Insurtech Startup Gets a Boost for Smartphone-Only Policies” Concept: To provide “Insure-a-thing” coverage for things like “flights, baggage and weddings.” Observation: Hmm, travel insurance and wedding insurance. Something that revolutionary certainly deserves an $8 million infusion of cash. And I’ll bet you that these “game-changers” have a phone app to distinguish them from everyone else. Apparently this is the insurtech equivalent of a guitar amplifier that goes to 11.