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Insurtechs Are Pushing for Transparency

Some startups list their fees on the company website and clearly evidence commissions on customer quotes.

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Over the past few weeks, I had the pleasure of meeting with a number of insurtech startups. Their mission? To create a customer-first company. One team is finding that customers believe insurance has more of a transparency challenge than a trust deficit – there is an increasing desire to know how their premium dollars are spent and how an insurance company views their risk. Many of these meetings were held shortly after Evan Greenberg, CEO of Chubb, commented on broker commissions and fees in the commercial insurance market. Whether you agree with Greenberg’s comments, what really attracted customers’ attention is the lack of fee and commission transparency within the commercial insurance market. Furthermore, many insurtech articles stress that, for a long time, brokers have been able to capitalize on the industry’s lack of access and transparency. These articles rarely highlight existing customer rights, nor do they articulate how commissions and fees have evolved in the commercial insurance industry. See also: More Transparency Needed on Premiums   Regulations in a number of jurisdictions make clear that insurance buyers are entitled to request the actual level of commission and fees earned by their service provider. For those jurisdictions where customer rights are not as clear, any customer is still within his rights to request this information as he is paying for services and products. For the past 20 years, brokers have shied away from having a frank dialogue with customers about the true costs of servicing a customer’s insurance program for fear of losing business to competitors. This fear of adequately charging for broker services, combined with decreasing standard policy commissions, led many brokers to consider alternative ways to make up revenue shortfalls. Increased commissions and fees from insurance companies provided the answer via traditional placements or the creation of broker facilities. Simultaneously, customer service has been redefined over time – many brokers now focus on reducing customer premiums as a way of evidencing value to customers. This focus is not a true service, nor is it really reducing overall costs as broker commissions and fees are passed on to customers through insurance premiums. These increasing costs hurt an insurance company's balance sheet. Just a quick reminder: A healthy balance sheet is required to pay claims! Why does a healthy balance sheet matter? Have you ever experienced the insolvency of an insurer or reinsurer? Have you ever informed customers they may only receive five cents on the dollar for existing and future claims? Unfortunately, I had these experiences on a number of occasions during my early career as a claims manager -- and I hope to never have the experience again! Fortunately, insolvencies are now rare events, due in part to the prudential regulatory regimes applicable to insurers, but that does not mean there is a bottomless commercial insurance company treasure chest for ever-increasing commissions and fees. Can insurtech companies lead the way forward? Marketing materials stress that insurtech startups are “customer-focused,” and their propositions are characterized by “convenience, on-demand, personalization and transparency.” For some of the startups, the company website and buying process stress that  “the business aims to provide transparency.” Other startups list their fees on the company website and clearly evidence commissions on customer quotes. One insurtech broker has taken additional steps on the company website to 1) define profit commissions and 2) provide a schedule of profit commission schemes currently in place with insurance partners (none listed as of May 3, 2017). This level of detail provides the customer with highlights of financial arrangements and improves financial transparency in the customer-broker-insurance company relationship. The future of transparency? Even though the insurtech industry has been progressing very swiftly, not every major insurtech startup is a roaring success.  SME customers can now compare commercial insurance products and services on offer, while improving their knowledge of products and service costs. See also: Is Transparency the Answer in Healthcare?   Commercial insurance brokers can lead transparency efforts by initiating frank conversations with customers about the true costs of products and customer-specific services and negotiate commissions and fees accordingly. However, as noted in my previous operations and product development articles, brokers, insurers and reinsurers must simultaneously review existing operations to create better efficiencies, reduce costs and improve customer services. These changes can be achieved through cutting-edge transformation programs, investment in new technologies or partnerships with insurtech companies. Why is a simultaneous review important? Because customers are not only bearing the costs of current broker commissions and fees via premium payments, they are also bearing the high costs of supporting antiquated commercial insurance operations. Let’s improve all levels of service and transparency in the commercial insurance buying cycle and help customers make better informed decisions!

David Cabral

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David Cabral

David V. Cabral is the founder and managing director of Artemis Specialty Ltd., a consulting firm that helps clients develop new products, reduce risk, improve operational efficiencies and increase profits.

The Failures and Successes of Insurtech

Even though the insurtech industry has been progressing very swiftly, not every major insurtech startup is a roaring success.

In the past 10 to 15 years, insurance technology, or insurtech, has been taking the world by storm. In fact, in 2016, VC investment in insurtech exceeded $1 billion. The rise of insurtech is largely due to the ever-increasing use of mobile devices and the need for quick, simple and safe insurance solutions that mobile users can use regularly. However, even though the insurtech industry has been progressing very swiftly, not every major insurtech startup is a roaring success. Here is a look at some of the lessons from insurtech's successes and failures. Successes
  • Everquote – Everquote is an insurtech company that helps people compare quotes for auto insurance premiums. The company was founded in 2010, and generated over $100 million in revenue in 2015.
  • Coverfox – Coverfox is a Mumbai-based insurance brokerage that enables people to easily buy insurance online. This company was founded in 2013. In 2015, it received $12 million in Series B funding. Its website currently averages 280k hits per month.
  • The Zebra – The Zebra is also an auto insurance comparison platform, like Everquote. This company was founded in 2012 in Texas. The Zebra has received over $23 million in investing, including an investment from Mark Cuban.
These three companies all fill significant needs in the insurance market. Everquote and The Zebra both allow customers to shop for the lowest auto insurance rates, and CoverFox allows people to find insurance coverage incredibly quickly for a broad range of risks. See also: 5 Insurtech Trends for the Rest of 2017   Also, all of these companies were founded in the last seven years, during the period when the insurtech market really started to heat up. So, the success of these companies is the result of a combination of good timing, the usefulness of service, and also, being appealing to vast numbers of people. The Less Fortunate Most insurtech companies do not enjoy the level of success obtained by Everquote, CoverFox, and The Zebra. In fact, like most startups, the majority in the insurtech field fail. Buy why? And what lessons can we learn? Here are some of the top reasons for failure cited by insurtech founders whose companies failed.
  • Timing – 5 insurtech founders said that one of the biggest reasons why their businesses failed was because of bad timing. This means either being too early or too late to market, and not meeting a consumer need that is current and strong.
  • Not Getting Funding Early Enough – Delaying funding was another reason cited as a key reason why insurtech companies failed. This makes logical sense, as funding brings company resources and stability to a whole new level. It also earns insurtech startups some degree of prestige that's hard to obtain without it.
  • Lack of Specialists on Staff – Often, startups do not realize the importance of having experts on staff who can take care of the complicated technical aspects of the business. Startups may be founded on a great idea, but that doesn’t mean that the people founding them have all of the required skills to make the company successful. Because of this, it’s no surprise that lack of specialists on staff was cited as another key reason why Insurtech companies fail.
See also: 10 Trends at Heart of Insurtech Revolution   Final Thoughts The insurtech industry is projected to grow steadily in the next few years. In fact, a single hedge VC firm, Aviva Ventures, plans to invest $100 million by itself in insurtech by 2020. That is just one firm! However, despite the strong predicted growth of the market, this does not mean that every insurtech startup will succeed. In fact, many will likely fail. The companies who can emulate this industry's successes and avoid the causes of failure mentioned above may have a better chance of achieving success.

Robin Roberson

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Robin Roberson

Robin Roberson is the managing director of North America for Claim Central, a pioneer in claims fulfillment technology with an open two-sided ecosystem. As previous CEO and co-founder of WeGoLook, she grew the business to over 45,000 global independent contractors.

When You Know the Claim Should Settle

It’s hard to play in the same game on workers' comp when one of you is at Dodger Stadium in L.A. and the other is at Angel Stadium in Anaheim.

Your best friend in negotiation can be your opponent—provided you put your report where your mouth is. Too often, parties withhold evidence that would support their position. Sure, your opponent’s initial reaction may be to denigrate your evidence. But your opponent may not have anything to refute it. It might even be too late for him to try to work up something. See also: How Should Workers’ Compensation Evolve? Help Your Opponent Convince the Client So why did it take so long to get to this point? Because you have been hiding the ball. If you expect large sums for a life pension or for treatment the carrier had denied. plus penalties plus fees, be prepared to show why the employer was wrong. You can’t expect opposing counsel to advise the client to change the case evaluation if you’ve been keeping secret the reports that crush the opponent's position. Of course, timing is important. There are many reasons why you might not want to show your hand too early. But by the time you are at the mediation table, you must be prepared to put your cards on the table. How Mediation Confidentiality Helps Perhaps you have a sub rosa video or some other smoking gun the other side doesn’t know about. Your mediation brief can be confidential-- for the mediator's eyes only. When you are in caucus (a private meeting with the mediator), you can discuss secret information with the mediator. If you don’t want it disclosed to the other side, it goes no further. But putting the mediator in the picture allows her to frame the issues in the case to maximize the potential for settlement. See also: 25 Axioms Of Medical Care In The Workers Compensation System   Negotiations succeed when parties are in the same ballpark. If you don’t communicate what your ballpark is, your opponent will assume that their evaluation is the correct one. It’s hard to play in the same game when one of you is at Dodger Stadium in L.A. and the other is at Angel Stadium in Anaheim. To bring everyone to the same field, you have to communicate.

Teddy Snyder

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Teddy Snyder

Teddy Snyder mediates workers' compensation cases throughout California through WCMediator.com. An attorney since 1977, she has concentrated on claim settlement for more than 19 years. Her motto is, "Stop fooling around and just settle the case."

Change Management Is Not About Change!

In most organizations and most cultures, change management is not about the change; it’s all about the management (control of change).

In 1993, my business cards included the tagline: Risk, Insurance and Change Management. When asked for a definition of change management, I would explain that change was the transition from today through tomorrows (the "s" on "tomorrow" suggested it is a process not an event). Management was about solving problems and capitalizing on opportunities as you worked through the process. More and more people now claim to manage change. I no longer do. See also: 3 Main Mistakes in Change Management   As the term became over- and misused, I moved to "change architect." The tagline chosen was a quote from Peter Drucker, “The best way to predict the future is to create it.” I even copyrighted and added the term "carpe mañana." (Seize tomorrow.) Early in the process, I heard a speaker state correctly, “Change isn’t progress. Change is the price we pay for progress.” How true it is. Today as I was struggling to address an issue of resistance to change, I had an “aha moment.” I realized that, in most organizations and most cultures, change management is not about the change; it’s all about the management (control of change). It is not about making the future better. It is about protecting and preserving the status quo – the individual and collective comfort zones. If you are serious about the future, don’t stand in today and look back to the good old days. Instead, turn your back on yesterday and look boldly to the horizon and design and build your own tomorrow – your future. See also: Is It Time for Un-Change Management?   Remember, “The greatest risk is not taking one.” (AIG Annual Report).

Mike Manes

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Mike Manes

Mike Manes was branded by Jack Burke as a “Cajun Philosopher.” He self-defines as a storyteller – “a guy with some brain tissue and much more scar tissue.” His organizational and life mantra is Carpe Mañana.

Is It Time to Buy a Biometric Scanner?

Biometric authenticators are slowly making their way into people’s homes and provide an important, third means of verification.

Identity theft is still out there, keeping pace with the latest innovations and security measures and snaring new victims every day. With the advent of cheaper, standalone, easy-to-integrate biometric technology for authentication, is it time to buy a fingerprint scanner? What’s a biometric scanner? Biometric technology uses physical or biological information, like a fingerprint, retinal scan or heartbeat, to authenticate a person’s identity. You can currently purchase the most commonplace biometric scanner—that is, one that uses a fingerprint—starting at around $50. The scanner can be used to protect computers and other devices that support biometric scanning technology. Do biometrics provide additional security? The short answer: Yes. Authentication can effectively use three things to keep the wrong people out: something you know, something you have and something you are. We’re all familiar with the first line of defense. “What you know” takes the form of security questions, passwords and a security picture, and there are various strategies to keep it all straight. Some choose to use password managers or proprietary systems like Apple’s iCloud Keychain. Others prefer to have an encrypted personal security list (logins, passwords) stored on a cloud server. Still others put “what they know” (but couldn’t possibly remember) on a USB stored on a keychain or in a safe if the information is not encrypted. And, yes, some go a little further, choosing to use a fingerprint-encrypted drive (i.e., biometrics). How you manage what you know comes down to personal preference, but the first line of defense is not fail-safe. In fact, there are hacks and breaches all the time. (If you believe you were the victim of a hack, you can view two of your free credit scores on Credit.com for signs of identity theft.) See also: Are Passwords Finally Becoming Passé?   The second line of defense, “something you have,” could be access to an email account, a key fob or your mobile phone. You need to have your phone in hand, for instance, to receive the verification code so you can get waved through some digital security checks. This is called two-factor authentication—and, yes, it’s more secure than simply protecting accounts with an alphanumerical password. The last line of defense, “something you are,” is a really hot topic right now. As I mentioned earlier, in sophisticated systems, this might include a scan of your retina, your finger- or handprints, your body weight (including ups and downs), your height, your face or all of the above. This information is clearly specific to you—and not so easily replicated—so, again, it’s miles more secure that the old standard password or even two-factor authentication. Needless to say, were you to implement a security protocol that combined all three of the above protocols of authentication, a) criminals would have a really hard time making any money, but b) we would all be frustrated. Does it have a place in the home? Biometric authenticators have been the security mode for quite some time in the military and wherever large amounts of money or gold or drugs or weapons are stored, as seen in countless spy and heist movies, but they are slowly making their way into people’s homes. From smartphones to gun lockers to personal computers, a steady march of devices is offering a biometric element for the user-authentication process. One example comes by way of a new secure credit card being tested by MasterCard in a chain of supermarkets in South Africa. The card is able to store an encrypted copy of the user’s fingerprint, which would make it exceedingly difficult for a scammer to beat. (Would it be impossible to beat? As with all great capers, only the crooks know for sure. There was a flurry of coverage not too long ago about how photos of people flashing a peace sign could lead to the theft of their fingerprints, thanks to the proliferation of high-definition cameras. But fact-checking website Snopes listed the story as “Unproven,” and for good reason. While it is theoretically possible, no criminals have been caught doing it.) Should I buy a fingerprint scanner? Here’s the rub: You won’t really need to. Unless you were born a long time ago, you may not know what an 8-track is. It came before the cassette tape, which preceded the CD, which is the grandfather of the MP3. When you want to make a point about obsolescence, there are few better examples than those clunky old tapes. I bring them up because current standalone biometric scanners are without a doubt the 8-track of digital security devices. See also: Biometrics and Fraud Prevention: Seeing Eye to Eye   If you accept the similarity between biometric scanning devices and MP3 players, the answer to the question above will be crystal clear. These days, MP3s can be played by all the devices we use most. We’re seeing the same thing happen with biometric scanning. Whether it’s a smartphone, a computer or MasterCard’s new fingerprint-encrypted cards, all stripes of products you use on a daily basis eventually will feature built-in biometric scanners. And, if you are buying something today and prefer devices with built-in (rather than bolt-on) security, don’t despair. There already are plenty of choices out there. Case in point: Anyone with the latest generation of a particular smartphone likely has the option of locking and unlocking the device with their thumb. Personally, unless and until all devices that should be secure feature biometric scanners, I would suggest opting for those that do—much in the same way I’d advise you to refrain from using “1234” as your password. You can learn more about biometric technology, how it works (and whether it can be hacked) here. Full disclosure: CyberScout sponsors ThirdCertainty. This story originated as an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners. This post originally appeared on ThirdCertainty.

Adam Levin

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Adam Levin

Adam K. Levin is a consumer advocate and a nationally recognized expert on security, privacy, identity theft, fraud, and personal finance. A former director of the New Jersey Division of Consumer Affairs, Levin is chairman and founder of IDT911 (Identity Theft 911) and chairman and co-founder of Credit.com .

When Will the Driverless Car Arrive?

A leading figure in the field predicts that self-driving car services will be available in certain communities within the next five years.

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When Chris Urmson talks about driverless cars, everyone should listen. This has been true throughout his career, but it is especially true now. Few have had better vantage points on the state of the art and the practical business and engineering challenges of building driverless cars. Urmson has been at the forefront for more than a decade, first as a leading researcher at CMU, then as longtime director of Google’s self-driving car (SDC) program and now as CEO of a driverless car dream team at Aurora Innovation. Urmson’s recent “Perspectives on Self-Driving Cars” lecture at Carnegie Mellon was particularly interesting because he has had time to absorb the lessons from his long tenure at Google and translate those into his next moves at Aurora. He was also in a thoughtful space at his alma mater, surrounded by mentors, colleagues and students. And, it is early enough in his new startup’s journey that he seemed truly in “perspective” rather than “pitch” mode. The entire presentation is worth watching. Here are six takeaways: 1. There is a lot more chaos on the road than most recognize.
Much of the carnage due to vehicle accidents is easy to measure. In 2015, in just the U.S., there were 35,092 killed and 2.4 million injured in 6.3 million police-reported vehicle accidents. Urmson estimates, however, that the real accident rate is really between two and 10 times greater.
Over more than two million test miles during his Google tenure, Google’s SDCs were involved in about 25 accidents. Most were not severe enough to warrant a regular police report (they were reported to the California DMV). The accidents mostly looked like this: “Self-driving car does something reasonable. Comes to a stop. Human crashes into it.” Fender bender results.
While we talk a lot about fatalities or police-reported accidents, Urmson said, “there is a lot of property damage and loss that can be cleaned up relatively easily” with driverless technology.
2. Human intent is the fundamental challenge for driverless cars.
The choices made by driverless cars are critically dependent on understanding and matching the expectations of human drivers. This includes both humans in operational control of the cars themselves and human drivers of other cars. For Urmson, the difficulty in doing this is “the heart of the problem” going forward.
To illustrate the “human factors” challenge, Urmson dissected three high-profile accidents. (He cautioned that, in the case of the Uber and Tesla crashes, he had no inside information and was piecing together what probably happened based on public information.)
[caption id="attachment_25868" align="alignnone" width="530"] Google Car Crashes With Bus; Santa Clara Transportation Authority[/caption] In the only accident where Google’s SDC was partially at fault, Google’s car was partially blocking the lane of a bus behind it (due to sand bags in its own lane). The car had to decide whether to wait for the bus to pass or merge fully into the lane. The car predicted that the remaining space in the bus’s lane was too narrow and that the bus driver would have to stop. The bus driver looked at the situation and thought “I can make it,” and didn’t stop. The car went. The bus did, too. Crunch. Uber's Arizona Rollover [caption id="attachment_25869" align="alignnone" width="530"] Uber Driverless Car Crashes In Tempe, AZ[/caption] The Uber SDC was in the leftmost lane of three lanes. The traffic in the two lanes to its right were stopped due to congested traffic. The Uber car’s lane was clear, so it continued to move at a good pace. A human driver wanted to turn left across the three lanes. The turning car pulled out in front of the cars in the two stopped lanes. The driver probably could not see across the blocked lanes to the Uber car’s lane and, given the stopped traffic, expected that whatever might be driving down that lane would be moving slower. It pulled into the Uber car’s lane to make the turn, and the result was a sideways parked car. See also: Who Is Leading in Driverless Cars?   Tesla's Deadly Florida Crash [caption id="attachment_25870" align="alignnone" width="530"] Tesla Car After Fatal Crash in Florida[/caption] The driver had been using Tesla’s Autopilot for a long time, and he trusted it—despite Tesla saying, “Don’t trust it.” Tesla user manuals told drivers to keep their hands on the wheel, eyes in front, etc. The vehicle was expecting that the driver was paying attention and would act as the safety check. The driver thought that Autopilot worked well enough on its own. A big truck pulled in front of the car. Autopilot did not see it. The driver did not intervene. Fatal crash. Tesla, to its credit, has made modifications to improve the car’s understanding about whether the driver is paying attention. To Urmson, however, the crash highlights the fundamental limitation of relying on human attentiveness as the safety mechanism against car inadequacies. 3. Incremental driver assistance systems will not evolve into driverless cars. Urmson characterized “one of the big open debates” in the driverless car world as between Tesla's (and other automakers’) vs. Google’s approach. The former’s approach is “let’s just keep on making incremental systems and, one day, we’ll turn around and have a self-driving car." The latter is “No, no, these are two distinct problems. We need to apply different technologies.” Urmson is still “fundamentally in the Google camp.” He believes there is a discrete step in the design space when you have to turn your back on human intervention and trust the car will not have anyone to take control. The incremental approach, he argues, will guide developers down a selection of technologies that will limit the ability to bridge over to fully driverless capabilities. 4. Don’t let the “Trolley Car Problem” make the perfect into the enemy of the great. The “trolley car problem” is a thought experiment that asks how driverless cars should handle no-win, life-threatening scenarios—such as when the only possible choices are between killing the car’s passenger or an innocent bystander. Some argue that driverless cars should not be allowed to make such decisions. Urmson, on the other hand, described this as an interesting philosophical problem that should not be driving the question of whether to bring the technology to market. To let it do so would be “to let the perfect be the enemy of the great.” Urmson offered a two-fold pragmatic approach to this ethical dilemma. First, cars should never get into such situations. “If you got there, you’ve screwed up.”  Driverless cars should be conservative, safety-first drivers that can anticipate and avoid such situations. “If you’re paying attention, they don’t just surprise and pop out at you,” he said. Second, if the eventuality arose, a car’s response should be predetermined and explicit. Tell consumers what to expect and let them make the choice. For example, tell consumers that the car will prefer the safety of pedestrians and will put passengers at risk to protect pedestrians. Such an explicit choice is better than what occurs with human drivers, Urmson argues, who react instinctually because there is not enough time to make any judgment at all. 5. The “mad rush” is justified. Urmson reminisced about the early days when he would talk to automakers and tier 1 suppliers about the Google program and he “literally got laughed at.”  A lot has changed in the last five years, and many of those skeptics have since invested billions in competing approaches. Urmson points to the interaction between automation, environmental standards, electric vehicles and ride sharing as the driving forces behind the rush toward driverless. (Read more about this virtuous cycle.) Is it justified? He thinks so, and points to one simple equation to support his position:
3 Trillion VMT * $0.10 per mile = $300B per year
In 2016, vehicles in the U.S. traveled about 3.2 trillion miles. If you could bring technology to bear to reduce the cost or increase the quality of those miles and charge 10 cents per mile, that would add up to $300 billion in annual revenue—just in the U.S. This equation, he points out, is driving the market infatuation with Transportation as a Service (TaaS) business models. The leading contenders in the emerging space, Uber, Lyft and Didi, have a combined market valuation of about $110 billion—roughly equal to the market value of GM, Ford and Chrysler. Urmson predicts that one of these clusters will see its market value double in the next four years. The race is to see who reaps this increased value. See also: 10 Questions That Reveal AI’s Limits   6. Deployment will happen “relatively quickly.” To the inevitable question of “when,” Urmson is very optimistic.  He predicts that self-driving car services will be available in certain communities within the next five years.
You won’t get them everywhere. You certainly are not going to get them in incredibly challenging weather or incredibly challenging cultural regions. But, you’ll see neighborhoods and communities where you’ll be able to call a car, get in it, and it will take you where you want to go.
(Based on recent Waymo announcements, Phoenix seems a likely candidate.) Then, over the next 20 years, Urmson believes we’ll see a large portion of the transportation infrastructure move over to automation. Urmson concluded his presentation by calling it an exciting time for roboticists. “It’s a pretty damn good time to be alive. We’re seeing fundamental transformations to the structure of labor and the structure transportation. To be a part of that and have a chance to be involved in it is exciting.”

Can You Leapfrog the Competition?

Once your organization jumps the gap, you’ll put distance between your organization and those that didn’t act on their knowledge.

In business, the gap between “knowing what to do” and “doing it” is of increasing concern. Why? Because in a world of rapid change, the gap between leaders and fast followers or laggards will at some point become insurmountable. The forces of change are shifting the status quo. New competitors are rising within and outside the insurance industry. Last month, Majesco published a research report, Strategic Priorities 2017 — Knowing vs. Doing, that highlighted how insurers are responding to changes in the marketplace. We followed that up with two blogs ­explaining the Knowing — Planning — Doing Gap, and how Habits Stifle Strategy. Today we are focusing on what’s really important…catching up or even leapfrogging! How do we close the gap between where we are and where we need to be to stay competitive? Recognize the gap. Seize the opportunity. Insurers are, at their core, risk averse. With today’s pace of change, however, the path of least risk will include taking some risks. The risk to invest in new business models, new products, new markets and new channels can, at minimum, keep insurers competitive. Even better, taking these risks could allow insurers to leapfrog the competition. Because the new competition does not play by the traditional rules of the past, insurers need to be a part of rewriting the rules for the future. There is less risk in a game where you write the rules. Are we acting upon our knowledge of the insurance industry, regulatory requirements and market trends to create a game that plays to our strengths in meeting changing customer and market needs? Or, are we simply educated observers waiting to see if it works, then follow? See also: A Manufacturing Risk: the Talent Gap   “Fail fast” is more than a technology, product, service or business model development mantra — it’s a directive to do ANYTHING that will place the organization out on the edge of change. A position of knowledgeable risk — risk with an opportunity for differentiation and growth — is the new normal for insurers. Ask your organization…is it riskier to jump into the gap with uncertainty about the potential of new ideas, or to sit still and accept the certainty of dramatic changes to the insurance industry as we know it? Bridge the gap in logical phases. To move from thinking to doing requires a new business paradigm in how we define and think about insurance in the digital age. Most organizations can’t simply flip off one switch (traditional business model and products administered on traditional systems) and flip another on (new business model and products on modern, flexible systems that will handle digital integration and better data acquisition and analysis). The shift is separating the insurance business models of the past 50-plus years that have been based on the business assumptions, products, processes, channels of the Silent and Baby Boomer generations from those of the next generation, the Millennials and Gen Z, as well as many in Gen X.  So, the shift will require steps that provide a bridge across a growing gap of pre- and post-digital age between leaders, fast followers and laggards. A paradigm shift in phases makes sense, so that business streams overlap each other. For example, we expect to see existing insurers and reinsurers increasingly looking for paths to create the business of the future and revenue growth, by capturing the next generation of customers with new engagement models, products and services. But while doing that, they must fund the future by transforming and optimizing today’s business and the current customers that they have grown over the past decade. As they rethink their business models and realign them with the customer needs and expectations of those who will be their customers for the next 10 to 20 years, they will logically still be catering to their loyal customers from the past 50-plus years. This will require insurers to know, plan and execute across these three paths:
  1. Keep and grow the existing business, while transforming and building the new business.
  2. Optimize the existing business while building the new business.
  3. Develop a new business model for a new generation of buyers.
These three focal points are critical steps in a world of change and disruption. A new generation of insur­ance buyers with new needs and expectations creates both a challenge and an opportunity. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry to become the new leaders of a re-imagined insurance business. Act. Right now. Close the gap. Not every insurance company will be successful in this new world of new customer risks and expectations, ever-advancing technology, data and analytics capabilities and expanding and blurring market boundaries. But if you are determined that your company will succeed, you must act now to start closing the most critical gaps between what your company knows and what it is doing in response to that knowledge. See also: A Gap That Could Lead to Irrelevance   Insurance companies must stop talking and start doing. We are entering a new age of insurance underpinned by a seismic shift creating leaps in innovation and disruption, challenging the traditional business assumptions, operations, processes and products of the last 30 to 50 years. The challengers, such as Lemonade, Splice, TROV, Haven Life, Root, Next Insurance and others, are bucking the status quo and introducing new business models, products, processes, channels and experiences for the future. Will they all succeed? Maybe not. But they will alter the landscape, just as others have in the past or in other industries, leaving companies who did not change in their wake. The implications for insurers are enormous. The gap between knowing and doing is putting insurers at significant risk. It is allowing them to fall further behind, making them irrelevant … and potentially extinct. On the flip side, once your organization jumps the gap, you’ll be in the enviable position of putting distance between your organization and those that didn’t act on their knowledge. Following a road map (similar to the one outlined in the three steps above) will bring your organization to a place where it will be prepared to capture growth and gain the agility to move in new markets. Closing the gap is a journey that begins with a first step of action. Take that step now!

Denise Garth

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Denise Garth

Denise Garth is senior vice president, strategic marketing, responsible for leading marketing, industry relations and innovation in support of Majesco's client-centric strategy.

Can Apps Manage Mental Health?

Smartphone apps are perfect for, say, detecting depression by watching for a fall in exercise and movement and fewer social interactions.

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Improved awareness and recognition of mental health problems and their complexity puts pressure on health systems to increase care. In turn, this stimulates exploration of the potential value of software applications (apps) run on mobile devices. The ubiquity of smartphones makes them an ideal tool for apps that can help individuals manage mental health. Apps create long-term patient health data in a way episodic clinic consultations cannot and generate a personal health record fundamentally different from a clinical patient record. Doctors have much to gain from the gaps in information being filled by continuous monitoring in this way. Insurers also can benefit from the potential of this technology, especially for claims. Health apps used on mobile devices can monitor physiological cues associated with sleep disturbance, anxiety, depression, phobias and psychosis. For example, depression is associated with a fall in activity levels – less exercise, movement and fewer social interactions. Sensors in smartphones can help spot patterns of altered behavior that may represent the early warning signs of lowered mood. See also: New Approach to Mental Health   Some apps help diagnose problems. Others help people track and manage mood using self-assessment techniques augmented by coaching functionality. Online environments are a gateway to support from more specialist clinical resources. The resources allow patients more control of their mental health management while enabling clinicians to monitor and support them remotely. (Read my blog, “The Growing Impact of Wearables on Digital Health and Insurance.”) Apps can also help with treatment by sending reminders about medication or appointments, regardless of the person’s location. And they can provide distraction from cravings or link with social networks at times of stress. This “nudging” is effective at altering behavior; for example, integrating text messaging in smoking cessation programs improved six-month cessation rates by 71% compared with the regular treatment. However, work remains to be done before apps can integrate with insurers' processes. The confidentiality and use of personal data generated and stored by apps is complicated and needs clarification. The accuracy and sufficiency of information is a potential concern, and hardware constraints may limit potential. More evaluation of the impact of digital technology is needed in research and clinical practice. See also: Not Your Mama’s Recipe for Healthcare   Meanwhile, insurers could engage with emerging providers of software solutions. Services like these will, over a relatively short time, become highly influential in the lives of people living with mental health problems. Pilot schemes that compare current insurance methods while evaluating new ones would take us one big step forward.

Opportunities in the Sharing Economy

The sharing economy is exposing situations in which new liabilities need coverage. Many are not covered by standard insurance policies.

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Companies such as Uber, WeGoLook, and Airbnb are taking the sharing economy to the next level by allowing people to earn money from assets they already own, and the spare time that they have. In fact, Airbnb, the short-term property rental company, saw sales of $900 million in 2015. Airbnb was also valued at an impressive $24 billion in the same year. For a company that owns zero properties, that's impressive! All of these changes are bringing a lot of questions for insurance. This is primarily due to the short-term nature of the sharing economy. See also: What to Learn From Sharing Economy   The Sharing Economy and Insurance The sharing economy is clearly fulfilling a number of consumer demands. That said, it is also exposing situations in which new liabilities need coverage. Many of these new risks are not covered by standard insurance policies. For example, people who rent out their homes for Airbnb purposes generally do not have the associated risks covered under a typical homeowner’s policy. Airbnb does offer insurance coverage up to $1 million. While this is a good start, the coverage may not be enough for very expensive homes, in situations such as a fire occurring in an urban area and spreading to other properties, or even where an unfortunate medical emergency or even death occurs. There are also other issues with Airbnb insurance, including the fact that it does not provide coverage if a guest shows up early or stays late. This can potentially be disastrous. People who use other assets such as their cars for business purposes may also find that their standard policies do not provide coverage. Ride-sharing companies such as Uber do provide some coverage for their drivers. However, this coverage may not be enough in many cases for drivers to have all of their claims fully covered. Opportunity for Insurers Because the sharing economy is growing rapidly and consumers are embracing it, there is a major opportunity for insurance companies. The millions of people who share assets in the sharing economy need adequate insurance solutions to help them cover their risks. Insurance companies can capitalize on this need by creating insurance products for entrepreneurs who provide on-the-go and on-demand services in the sharing economy. And many already have! One insurance company that is moving full steam ahead in the sharing economy insurance market is Slice. Slice provides “pay per use” insurance policies that cater to sharing economy workers. In 2016, Slice received $3.9 million of funding as a reward for this innovative business model. Companies such as Lemonade are taking it one step further and even offering insurance as a shared asset through a peer-to-peer model. Lemonade has its users pay a flat service fee and payouts for claims come from premiums paid by networks of friends. This prevents Lemonade from having incentives to reduce the amount of payouts made. It is a revolutionary approach to insurance! See also: Sharing Economy: The Concept of Trust   Final Thoughts Considering that the sharing economy is expected to grow to $355 billion by 2025, it is safe to say that the sharing trend is here to stay. This means that it is wise for insurers to get on board and to start accommodating it sooner rather than later. Slice and Lemonade are two examples of companies that are already attempting to gain strong market share in the sharing economy. However, even though these companies are gaining traction, there is still likely to be substantial opportunity for any insurer that can help to provide insurance for the sharing economy. It appears that the time has come for the insurance industry to adapt and change to accommodate the consumer demand for sharing economy-centric policies.

Robin Roberson

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Robin Roberson

Robin Roberson is the managing director of North America for Claim Central, a pioneer in claims fulfillment technology with an open two-sided ecosystem. As previous CEO and co-founder of WeGoLook, she grew the business to over 45,000 global independent contractors.

Aggressive Regulation on Data Breaches

The FTC appears to be taking preemptive measures against a company making IoT devices, not waiting for a cyberattack to occur first.

Below is an excerpt from John Farley’s new book: "Online and Under Attack: What Every Business Needs To Do Now To Manage Cyber Risk and Win Its Cyber War." The Internet of Things Every one of us lives in a brave new connected world. For most of us, our first foray into the online world occurred at work, as business discovered the internet provided a means to efficiencies that made them more competitive. The convenience of the internet has spilled over in dramatic fashion into our personal lives. The average home contains 13 internet-connected devices, and that number is growing fast. It has given birth to the term we know today as the Internet of Things (IoT). According to the FTC’s 2015 staff report “Internet of Things: Privacy and Security in an Interconnected World,” the number of internet-connected devices surpassed the number of people living on the earth several years ago. As of 2015, there were an estimated 25 internet-connected devices. The FTC estimates that this number will double to 50 billion by 2020. Consumers love the convenience that these products bring, and manufacturers recognize this. There has been a tremendous rush to the market, as everything from security cameras, DVRs, routers, TVs, cars, thermostats and children’s toys are being designed to connect to the internet. The list grows daily. Unfortunately, recent history has shown that as manufacturers hurry to capture their share of the market for these devices, many have ignored the concept of security at the design stage. Instead, the focus was to get products manufactured quickly and economically. Extra steps in the product design stage, such as addressing security, would likely increase design time, make them more difficult for the consumer to set up and ultimately increase cost. As a result, many products in our homes lack basic cybersecurity controls and are subject to online threats as demonstrated earlier in this book in the Dynamic Network Systems attack in October 2016. Many products come with easily guessed passwords or none at all. When security flaws are recognized by manufacturers, they are often not easily patchable. See also: Firms Ally to Respond to Data Breaches   The FTC has taken notice and made its concerns heard in January 2017 by filing a lawsuit against Taiwanese D-Link and its U.S. subsidiary, D-Link Systems. In the complaint, the FTC alleges the company made deceptive claims about the security of its products and engaged in unfair practices that put U.S. consumers’ privacy at risk. D-Link sells networking equipment that integrates consumers’ home networks, such as routers, internet protocol (IP) cameras, baby monitors and home security cameras. These devices allow consumers to do things like monitor their homes and children in real time. Consumers simply access the live feeds from their home cameras using their mobile devices or any computer. The crux of the lawsuit alleges that D-Link failed to protect consumers from “widely known and reasonably foreseeable risks of unauthorized access.” There are several allegations made by the FTC where it alleges D-Link failed to do the following:
  • Take reasonable software testing and remediation measures to protect its routers and IP cameras against well-known and easily preventable software security flaws that would potentially allow remote attackers to gain control of consumers’ devices.
  • Take reasonable steps to maintain the confidentiality of the “signature” key that D-Link used, which resulted in the exposure of the private key on a public website for approximately six months.
  • Use free software, available since at least 2008, to secure users’ mobile app login credentials, instead storing those credentials in clear, readable text on users’ mobile devices.
The case is especially noteworthy because it is not alleging a known breach of security in D-Link devices. Instead, the FTC appears to be taking measures against the company, and not waiting for a successful cyberattack to occur before acting. So we may refer back to the FTC 2015 staff report “Internet of Things: Privacy and Security in an Interconnected World” for guidance. In that report, the following recommendations are made by the FTC:
  • Build security measures into devices from the outset and at every stage of development—don’t wait to implement retroactive security measures after the devices have already been produced and sold.
  • Consistently maintain up-to-date software to secure consumer personal information, and ensure regular software testing. Any identified vulnerabilities should be remediated promptly; connected devices should be monitored throughout their life cycles; and security patches should be issued to cover known risks.
  • Take steps to implement reasonable access-control measures for IoT devices, including making sure proprietary device signatures remain confidential.
  • Accurately describe the products’ safety and security features in marketing and promotional materials.
See also: Data Breach Law Could Hurt Consumer

John Farley

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John Farley

John Farley is a vice president and cyber risk consulting practice leader for HUB International's risk services division. HUB International is a North American insurance brokerage that provides an array of property and casualty, life and health, employee benefits, reinsurance, investment and risk management products and services.