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Is It Time to Outsource Printing?

Many fear losing control because the print shop is not within arm’s reach, but outsourcing can improve quality and efficiency.

Gina Ferrara

October 9, 2017

Determining whether to shut down your internal print and mail operation and outsource to a print service provider, or keep it in-house and potentially make a capital investment in new technology can be a tough conversation. Those in favor of the latter option will cite concerns over sending customer data outside the organization and advocate that investing in new technology will improve operational workflows, enhance the customer experience and increase brand recognition by adding color to documents, as well as potentially generating a better ROI for the organization. Proponents of outsourcing believe that print is not a core competency and argue that outsourcing to a service provider would be the less expensive alternative. While there may be a variety of reasons that cause an insurer to consider closing the print shop, a few factors can create the perfect storm. 1. Decline in transactional print volumes Electronic delivery of customer communications was a high priority for many organizations as a cost-reduction strategy. While adoption rates may have varied, electronic delivery nonetheless caused transactional print volume to decline, even causing some enterprises to consolidate production into one site. Print volumes decline, unit costs go up and outsourcing becomes more financially attractive. 2. Equipment has reached end of life or end of lease Insurers in need of a technology refresh may not be willing to make the investment or be able to justify the expense. New technology can speed production, streamline operations, enhance documents with color capability and reduce risk; however, if priorities have changed and the customer communications management (CCM) strategy has shifted toward enhancing the digital experience, convincing management to invest in print technology may be a tough hurdle to overcome. 3. Limited or no color capabilities Some in-plants can only produce output in monochrome, or have very limited color capability. With the demand for color increasing, internal lines of business may look to an outside vendor to meet their requirements for color, and corporate marketing may have already beaten them to it. From a financial perspective, this is a double whammy. Outsourcing a subset of documents to a third-party provider decreases the volume for the in-plant facility and further exacerbates the impact on unit cost. In addition, outsourcing low volume to a third party can be costly for two reasons: higher unit costs from no economies of scale and additional conversion costs if the organization decides to consolidate all print volume with a single service provider in the future. See also: What Tasks Should Agencies Outsource? 4. Increased regulatory pressures require full document integrity Non-compliance with regulations can be costly from a financial and reputational risk perspective. Production issues such as double stuffs or incorrect document breaks create privacy issues with personally identifiable information (PII). Organizations must take the appropriate measures to ensure that sensitive data is secure. Software that provides factory controls and tracking capabilities for each mail piece throughout the entire manufacturing process is critical to ensure correct and complete packages. 5. Single-site operations must rely on third-party providers for disaster recovery and business resumption services If an enterprise operates one site, or has consolidated sites due to decreased volume, then disaster recovery and business continuity services must be contracted with a third party. Acquisition of facilities due to a corporate merger may not always provide the ability to transition print files from one site to the other if software, equipment and infrastructure differ. Worse yet, sometimes older equipment gained by acquisition must be kept due to machine-specific print jobs. 6. Change in management philosophy Even without the previous five factors, sometimes a change in senior management philosophy might be the one driver for the decision to outsource. C-level management may believe that print and mail is not a core competency of the overall business and thus should be outsourced to a service provider. While it makes sense to consider outsourcing if print volumes have been on the downward slope, there is no magic number or volume threshold that dictates the exact time to do so. Understanding the benefits that can be obtained by outsourcing may help to reduce anxiety and clear up the stormy skies clouding the decision process. To start, no capital investment in new equipment is required. Unlike an in-plant operation, service providers have the ability to spread the cost of capital across multiple clients and have made the investment in color technology. Due to greater economies of scale, service providers have great buying power for consumables such as ink, paper and envelopes. In addition, a reduction in postage expense could be realized if postal densities for five-digit and three-digit rates are met. To remain compliant with certain regulations, service providers must have strict production controls and data security procedures to ensure that sensitive data is protected. File-based tracking tools ensure that files are received on time and that record counts are accurate, while piece-level or page-level tracking ensures that each mail package is correct and complete. Detailed production reports with key performance metrics (KPIs) are available via a dashboard allowing clients to log in, view production job status, request document pulls or re-directs and even create customized reports. To facilitate testing, quality reviews can be performed prior to releasing files into production via a review-and-release capability. Once the decision to outsource has been made, it is time to set sail and begin the journey. Because price will most likely be a significant factor in vendor selection, here are a few tips that should be kept top of mind:

Create a complete inventory of all printed communications to be included in the request for proposal (RFP). Consolidating all print – what is produced internally or by external vendors – with a single provider is the best way to maximize volume pricing.
Understand what is included in transition costs, which can vary significantly by provider. To secure a contract award, some may include a certain number of free hours of development time as part of the transition cost.
Standardizing address location on documents eliminates the need for multiple types of envelopes, streamlines the manufacturing process, allows for jobs to be concatenated together and helps to keep production costs down.
Review SLAs for all applications to determine if there is flexibility.
Contract duration will typically affect price; therefore, annual pricing quoted in a five-year contract will be less than in a three-year contract.

See also: Go Digital… but Don’t Change Who You Are Deciding whether to outsource print requires consideration of a variety of factors, but with a detailed analysis of the pros and cons of both options, an informed decision can be arrived at more easily. Many insurance organizations fear losing control because the print shop is not within arm’s length, but the security, output quality, and efficient manufacturing controls implemented by top tier service providers should help to alleviate that fear. No transition is perfect – but the technology, processes, and depth of knowledge offered by a print service provider will ensure smooth sailing.

Gina Ferrara

Gina Ferrara is senior analyst at Madison Advisors, an independent analyst firm that specializes in offering Fortune 1000 companies context-specific guidance for a range of content delivery strategies, particularly those addressing enterprise customer communications.

Agent & Broker

Distribution: About To Get Personal

The supply chain will co-exist with brands and within ecosystems unconnected to insurance. Carriers will be irrelevant.

Rick Huckstep

October 9, 2017

The buying of insurance is going to change. The “sold, not bought” view of insurance distribution has run its course for many lines of business. Customer expectations have changed, and the inside-out approach to building silo-ed, exclusion-filled, fixed-term products just doesn’t cut it anymore. For this month’s InsurTech Insights, let's look at a new means of distribution that will fundamentally change the insurance supply chain, where insurance will be supplied through ecosystems as part of a wider proposition and not a solo purchase bought in isolation. After all, people don’t set out to “buy” insurance per se. What they want is a safety net in case something untoward happens.

"Your fat margin is my opportunity"

The insurance supply chain is typically seen as a linear model. Insurance distribution starts with brokers, ARs and MGAs at the front end. Carriers underwrite risk and decide whether to pay a claim. And the buck stops with the reinsurers. Front to back, risk and premium move from one intermediary to another, each one taking its share. It’s a model that hasn’t really changed over the last century. “Your fat margin is my opportunity” is the Jeff Bezos quote that defines the era of digital disruption. We now see tech-savvy entrepreneurs finding ways to “disrupt” established business models using digital and mobile to streamline out-of-date business models oozing with fat margin. When you look at the world of insurance, it’s easy to imagine that Bezos was looking at the world’s largest industry when he made that quote. It’s no surprise that insurtech has become the new fintech. The combination of many intermediaries in the supply chain, each one taking margin, together with the inefficient friction that goes with it has fueled the rise in insurtech. When you add in the shift in agency to the consumer (because of the likes of Bezos and how he built Amazon by putting the customer absolutely and unequivocally at the center), it is easy to see why insurance is a juicy target for digital disruptors. See also: Taking the ‘I’ Out of Insurance Distribution Redefining the Insurance Supply Chain As the insurance industry catches up and embraces the Fourth Industrial Revolution, we will see a redefining of the insurance supply chain. It's started already. It will evolve from the traditional linear model where risk and premium move front to back in a bi-directional flow. In its place, we see new supply chain models for insurance distribution at the front end with efficient management of risk capital at the back. Of course, as a highly regulated industry, insurance faces a drag on change from the legislature. But just as regulators and lawmakers made adjustments to accommodate the fintech models for alternative finance, they will follow suit in insurtech. And why wouldn’t they?

In the new model for insurance distribution, the supply chain will co-exist with brands and within ecosystems unconnected to insurance. Customers will be rated as individuals and not members of a risk pool. A greater share of premiums collected will be set aside to pay claims. Instead of sales commissions, there will be platform fees. Time to pay claims will become the KPI of choice for customers to rate their insurance experience. And as convenience replaces price as the key buying criterion, the way that insurance is distributed will change. Automation is key for insurance distribution In the new insurance supply chain, there will be fewer handoffs, less friction, less premium erosion. Just like with Amazon, the customer will be absolutely and unequivocally at the center of the ecosystem. Trusted brands will own the customer relationship. These brands know the meaning of loyalty and will value these relationships highly. They also understand how expensive it is to build them in the first place, and how easily that can be lost. Amazon-like levels of service will become the norm for both insurance distribution and paying out claims. Automation is the key to making it very, very easy to do business. Of course, someone will need to manage risk capital. This will be the domain of the reinsurers, with the role of the carrier becoming superfluous. The reinsurers know better than anyone how to manage large pools of risk capital. They’ve been carrying the insurance industry for long enough. In the new insurance supply-chain, firms like Sherpa will own and manage the customer experience. The Sherpa model is to charge a value-based annual fee to a customer in return for meeting all insurance needs. This removes sales commission from the equation. The founder and CEO of Sherpa, Chris Kaye, explained to me, “Today, insurers pay sales commission for selling the insurance products that the insurers have created. “We are turning that on its head and creating a membership organization that is unequivocally on the consumer’s side. No more commissions for products you don’t need, instead a flat fee to assure the risks that matter most are protected.” How does this work in the Sherpa model? On behalf of customers, Sherpa goes straight to Gen Re and buys insurance wholesale. Sherpa can distribute personalized insurance products to customers while packaging up parcels of risk at the back end. This innovative approach is one example of how customer brands will be able to fine tune, personalise and price based on a whole set of new and different risk criteria. So what? Well today, insurers create the products that they want to sell. Brokers do their best to find the best match of their customer’s needs to the fixed insurance products on offer. But customers end up paying for cover they don’t need. And they don’t always get the specific cover that they do want. The new approach allows the brand, in this case Sherpa, to personalize the cover specific to the individual while packaging up modules of risk for the expert managers of risk capital. Go west to see the future of insurance distribution China’s ZhongAn epitomizes everything that is insurtech. It is a 100% digital tech business with around 1,500 employees. More than half of them are developers, and none are in sales. The company also happen to provide insurance, and a lot of it! In the first three years of trading, ZhongAn wrote more than 5 billion policies. It sold 200 million policies in one day alone last November during China’s annual online shopping fest! The thing that makes ZhongAn the darling of insurtech is that 99% of all operations are automated. Quote, policy, premium collection and claims are all automated, which is why the company can process 18,000 policies a second. But it’s ZhongAn’s approach to premium pricing and insurance distribution that really set it apart. First, the insurance business is built around retail ecosystems. The products are embedded in the customer buying process through retail sites. The company makes it super easy to buy insurance, simply by checking a box. Next, the insurance is micro-priced, based on a personalized premium, unique to the individual customer. ZhongAn does not use the law of large numbers to price risk premium. Instead, ZhongAn uses big data for dynamic and personalized pricing. There is no single price list for insurance products. Customers are risk-assessed individually and priced accordingly. For ZhongAn, it is more important to build customer loyalty (aka stickiness) through speed and convenience. See also: Distribution Debunked (Part 1) ZhongAn use ecosystems to distribute insurance A question I get asked a lot is: “Are these insurtechs an insurance firm or a tech firm?” It’s a great question, just like asking if AirBnB is a hotel chain or if Uber is a taxi firm. Of course, there are many old diehards of the insurance industry who rail against that question and revert back the old mantra of “an insurance company is an insurance company.”

But the reality is that, in this rapidly changing digital world, the fundamental nature of providing a financial safety net is changing, too. The old “insurance product,” designed by insurance companies to suit their own needs and aimed at customer segments that never claim, is on its way out. In ZhongAn’s case, it is a tech company first, which is why it can take a fresh approach to insurance, unhampered by old ways of thinking. When it comes to insurance distribution, ZhongAn’s business model is based on supplying insurance cover through an ecosystem partnership model. The company doesn’t pay broker fees or have to support a huge cost of sale. Instead, it has partnered with leading players that already have a customer base across many different market sectors. This allows ZhongAn to directly embed insurance products into an online experience, making it really easy for the customer. Customers simply check a box to include the insurance cover. The premium is dynamically, real-time, micro-priced, unique to the customer at that moment. This is all about improving customer experience. Insurance distribution is going to change, it’s just a matter of time

For many, it is hard to imagine a world where insurance could be any different than how it has been for the past 100 years. To them I say, cast your mind back to 1995. It was only 20 odd years ago that people were talking about this thing called the World Wide Web and about how everything could change. A lot of it sounded science fiction and the stuff of fantasists at the time. Even so, nobody could have possibly imagined the full extent to which the world would change. And, over such a short span. All because of this thing called the internet. Just as the supply chains of many industries have changed in the internet era, so will that of the insurance industry. It’s no long a question of “if,” but “when.”

Rick Huckstep

Rick Huckstep is chairman of the Digital Insurer, a keynote speaker and an adviser on digital insurance innovation. Huckstep publishes insight on the world of insurtech and is recognized as a Top 10 influencer.

Emerging Technologies

InsureTech Connect 2017: What's New

Many insurtechs and their insurer partners are on the verge of rollouts and implementations that will produce major results.

Mark Breading

October 6, 2017

The insurtech movement is in full swing, and one need look no further than the ITC2017 event for evidence. The event itself mirrors the trajectory of the most successful insurtechs – coming out of nowhere to achieve success virtually overnight, at least overnight in the context of the insurance industry. Any event that goes from nothing to 1,500 participants in year one and 3,800 in year two is worthy of attention. ITC and, in fact, insurtech overall has been a wild ride. And I say this as an active participant in insurtech – as a mentor, adviser, researcher and strategist to insurtechs, insurers and incumbent tech firms. So, a few observations and predictions on the movement are in order.

Growth. In early 2015, SMA began tracking insurtech startups. The initial list had about 50 companies and has grown rapidly to have almost 1,200 worldwide. There have been failures along the way, but there is still an upward trend in the number of startups.
Maturity. In many of the first encounters I had with insurtech founders, there was a certain self-admitted naivete regarding the insurance industry. Many happily volunteered that they knew nothing about insurance, but had a really great idea that was going to disrupt the industry. Fast forward to today, and you find many industry veterans who have been brought on board, much learning about the industry on the part of those inexperienced with insurance and a newfound respect for the strengths of the traditional industry.
Partnering. Everyone in the ecosystem is seeking partners – re(insurers), insurtechs, existing tech companies (what we call MatureTechs), accelerators and others. In most cases, it is not about displacement but more about enhancement through partnering.
Experimentation. Trying new business models, new products and coverages, new distribution approaches and new operational activities is more widespread in the industry than it has ever been.
Excitement. There is a palpable sense of excitement, energy and enthusiasm in insurtech crowds. The mix of individuals and background is more varied than ever, creating sparks of innovation everywhere.

See also: Top 10 Changes Driven by Insurtech The one aspect of insurtech that is still in early stages is the powerful, mind-bending results. There are premiums being run through insurtech players every day; insurers are achieving operations efficiencies and improving the customer experience, and they are placing new products on the market. But in the context of a massive industry, the numbers and the impact are still small. I offer three main predictions on where insurtech is likely to head over the next few years:

Results/Impact. Many insurtechs and their insurer partners are on the verge of rollouts and implementations that will produce more substantial results. We are likely to see some insurtechs emerge as big winners.
Growth Curve: SMA expects the number of insurtechs to continue to increase, as capital and appetite are still there to fuel growth. However, we will enter a phase in the next one to two years when more startups close their doors, are acquired or otherwise exit as standalone firms.
Convergence: Insurers and insurtechs are already finding successful formulas that leverage the traditional strengths of the insurer with the new technologies, capabilities and ideas of insurtechs. This is likely to be the predominant trend over the next few years.

See also: Insurtech Is Ignoring 2/3 of Opportunity Insurtech is beginning to change the industry, playing a major role in insurance transformation. Many insurers have already been spurred into more aggressive strategies because of the activities in insurtech. At the ITC2017 and similar events, we are starting to glimpse the new face of the insurance industry.

Mark Breading

Mark Breading is a partner at Strategy Meets Action, a Resource Pro company that helps insurers develop and validate their IT strategies and plans, better understand how their investments measure up in today's highly competitive environment and gain clarity on solution options and vendor selection.

Going Digital

Is Insurance Broken? (Part 1)

No, insurance isn’t broken, but it has been painfully slow to evolve and is now in desperate need of some modernization.

Braden Davis

October 6, 2017

Long on fear, short on facts, so-called disrupters are using “insurance is broken” as a marketing tool to win customers. In Jetty’s view, insurance isn’t broken, but it has been painfully slow to evolve and is now in desperate need of some modernization. Insurtech is heating up, with more being written about this corner of the insurance industry than ever before. At Jetty, we’ve been busy combining a novel combination of products to help streamline the home rental process and, along the way, participating in a lot of conversations all across the spectrum about how the insurance industry is evolving. As we headed to InsureTech Connect, we saw this as a good time to kick off “Signal to Noise,” a recurring series of thought pieces about the various aspects of insurtech — the things that matter to all of us to some extent or another (or ought to), whether it’s the technical workings of insurance, the individual products, distribution challenges and opportunities, or the increasing awareness and focus on the customer experience. Starting now and continuing through the end of 2017, my colleagues and I will go into far more detail in each of those distinct areas of Insurtech. To kick off this series, let’s take a high level look at how the signal-to-noise ratio is obfuscating our sense of the industry’s real challenges, by unpacking Insurtech’s most clickbait-worthy claim: insurance is broken. An introduction The single biggest element missing from personal lines insurance is a real understanding of one rather important, but often forgotten figure in the equation — the customer. Specifically, how the customer’s needs should inform product development, distribution strategies, and the customer experience. Here in Part 1, we’ll explore the "insurance is broken" narrative, where it is misleading and, conversely, where it highlights genuine shortcomings. And in future articles we’ll go deep into each area. The fundamental, technical aspects of insurance Broken-o-meter-score: Low

At its core, insurance is sharing or “mutualization” of risk — a concept that has been practiced for thousands of years in different formats, but with the same fundamental principle: the distribution of the risk of loss, and ensuring mutual aid. For as much noise as is out there, the reality is that this “risk transfer” element is one of the strongest and healthiest aspects of the industry. And as much as some Insurtech’s claim to be reinventing the model, the reality is that this principle continues to serve as the basis of our industry. Another oft-criticized technical aspect is the policy “form”. The technical and court-tested contract language, while neither pretty nor readily-comprehensible to laymen, functions as it should. Let’s not forget that an insurance policy is a legal contract, and the legal system demands specificity. The problem lies not in the existence of the jargon itself, but rather in the failure to translate that jargon into plain English, on customers’ terms. At Jetty, we’re working to not just translate the technobabble into more easily digestible information but to make it relevant, maybe even enjoyable, and definitely more approachable. Easy when the bar is low! See also: Innovation: ‘Where Do We Start?’ The insurance product Broken-o-meter-score: Medium

Clever wording and great design aside, on the product front, being approachable just isn’t enough. The coverage offering — the scope and context of the protection which the insurance product should provide — is outdated. Consumer behaviors and expectations have changed. What are consumers most concerned about? Not a Zenith Console Hi-Fi —an iPhone. Not a mink coat —a Prada handbag. Not your father’s Oldsmobile — actually, not even a car at all. Not how do I protect the stuff in my rental home — how do I even get into a rental home. That last one — getting into a rental home — is one of the biggest pain points for the modern urban consumer, and is why we created Jetty’s Passport Deposit and Passport Lease products as part of an all-encompassing solution to update and streamline the entire home rental process. The products aren’t broken, but the industry is only now spending energy considering how they can be updated to address the emerging and changing needs of modern consumers. At Jetty, our products are a lot of things: updated, enhanced, combined, all in the pursuit of an all-encompassing solution to address the entirety of the home rental problem set. But they weren’t created anew. Because the underlying insurance products aren’t broken. The distribution model Broken-o-meter-score: High

In many ways, the U.S. is one of the world’s most innovative and technologically-advanced markets, where customer service and convenience are the hallmarks of our retail model. In contrast with almost every other consumer vertical, insurance is one American industry which lags far behind (ironically, this is not the case in some other parts of the world). At this point, many Insurtechs and pundits will throw agents under the bus in their interest to suggest the model is “broken.” It’s certainly not the most efficient and convenient model, but agents do provide a valuable and important service for the segments of the market that need real advice for complex situations. And just because those pundits think the advisory process is cumbersome, it doesn’t mean that they should (or will) be able to get away with shirking their duty to advise. The modern American consumer has grown up with different expectations — she is digitally-native and prone to prefer self-service. This widening gap creates both a great opportunity and one of the more interesting challenges — namely, how to provide intelligent, relevant advice through a more efficient technology-driven platform, accessible to the consumer wherever she may be. The customer experience Broken-o-meter-score: Very High

Insurance is a consumer good, but somehow, our industry never participated in the transformation experienced by the rest of the financial services market. This myopic perspective has only been amplified over the years as the changing expectations around ease of use and self-service have increased across the board. While everyone is racing to throw chat bots, AI, and IoT at the problem, the consumer’s fundamental expectation is this: a simple and straightforward process that leaves him or her feeling happy and relieved at the end. Most consumers view insurance as a necessary evil — how refreshing would it be if they can instead experience insurance as a problem-solver and an enabler. Providing a great consumer experience is more than tools and process (and far more than buzzwords) — it’s the entire look-and-feel, the voice, the lingo — everything that is tied up in the “brand.” See also: Top 10 Changes Driven by Insurtech At Jetty, we probably invested just as much time and sweat equity into our FAQ as we did in creating a clear and compelling consumer experience. And it is paying off handsomely, as informed customers consistently make solid decisions about how to use the Jetty products to help get into and protect their things in the place they rent. Tying it all together Insurance isn’t broken, but it certainly needs a refresh, free from false promises and criticisms that simply increase confusion. At Jetty, we’re combining an ability to speak to our customers in a way that resonates, with novel and thoughtful analytics that allow us to tailor coverage specifically to their lives. We’re adding real innovation by offering new and novel coverages that address emergent pain points like Bed Bugs and Lease Guaranty, alongside traditional products. We engage with our customers in ways that are simple and natural with how they obtain and process information, and navigate life’s obstacles. That’s our focus — presenting an entire solution specific to the modern consumer, with an innovative process and product combination that is easy, relevant, and instills confidence for renters and landlords alike. The challenge for our industry is to finally approach insurance as a consumer good, bring a “big-M” approach to marketing and deliver on a truly refreshing and stress-relieving experience. And this is a great week to keep this thought top of mind: What are you doing to deliver novel solutions to improve customer experience and address customer needs?

Braden Davis

Braden Davis is CEO at Jetty.com. Currently, Jetty focuses on solving the problem of renting a home through a novel offering of financial services and insurance products that solve major headaches for consumers and landlords. Offered in combination or à la carte and accessible over any digital device, Jetty products are widely available across the United States, and aiming to be nationwide by the end of 2017.

Going Digital

Lemonade: Interview With CEO

"Not just our business model but also the whole product flow is informed by behavioral economics."

Roger Peverelli

Reggy De Feniks

October 6, 2017

Lemonade is currently the most talked-about disruptor. That’s why we’re pleased that, for the first time in Europe, Lemonade will present at DIA Munich what the pioneering concept is all about in a keynote presentation. As a special DIA Munich appetizer, we spoke to Lemonade CEO and co-founder Daniel Schreiber recently, exactly one year after the company launched. DIA: Daniel, congratulations on Lemonade's first anniversary. It must have been a roller coaster ride. Thanks for being willing to share some of the experiences and learnings. Did the first year meet your expectations? Daniel: "Yes, it has been quite a ride. But it is great to see that we're striking the right chord. We already sold ten thousands of policies. Our portfolio doubles every 10 weeks." DIA: If you had to name just one thing, what would you say is the key success factor so far? Daniel: "Our renters insurance is 80% cheaper than what competitors offer and takes less than 90 seconds to purchase.” DIA: 80% cheaper is almost unbelievable … Daniel: “Many industry insiders think so, too. [They think that] at least 40% of what insurance carriers receive in premiums is paid out in claims. So if Lemonade is 80% cheaper it must lose money on every policy. That is not true. Renters insurance covers personal property, not real estate. The expected loss is therefore significantly lower and so should the corresponding premium be. Unfortunately, the enormous overheads incumbents have make low-premium products impossible. Their minimum premium reflects their high costs rather than your low claims.” See also: Lemonade’s New Push: Zero Everything DIA: We can imagine that such a price difference attracts a specific segment … Daniel: “Yes, indeed. We offer a good price, especially at entry levels. No less than 87% of our customers are first-time buyers. Lemonade is the preferred insurance brand among first-time insurance buyers. In the state of New York, where we first launched Lemonade, we now have a market share of 27% among first-time buyers.” DIA: Was this the target segment you planned to focus on initially? Daniel: "Not really, at least not to this extent. This was definitely not planned or expected. It appears our proposition is attracting people who did not think of such an insurance before; because it was too expensive, too much hassle, or because they had little trust in the added value. So it turns out we actually opened up an underserved, untapped market. This was really a surprise for us, as well. It just shows that with really new propositions there is only so much that you can plan." DIA: This suggests the Lemonade concept is about solving frictions that customers experience when dealing with a traditional insurance incumbent. Aren't you selling yourself short here? Daniel: "True. It is not just about solving frictions; being faster, better or cheaper. That wouldn't be sufficient in the long run. When we started conceiving Lemonade, we immediately realized there is no way you can beat insurers at their own game. We needed to think beyond that. We decided to foster trust, not suspicion. Our business model is built on two very distinctive pillars: behavioral economics and artificial intelligence.” DIA: The pillar that is often highlighted is behavioral economics, one of the reasons we like Lemonade so much. Insurers could benefit much more from psychology and social sciences. Daniel: "The vast knowledge and experience of our Chief Behavioral Officer Dan Ariely (professor of psychology and behavioral economics at Duke University) is instrumental in this. We apply behavioral economics to neutralize the adversarial relationship, the conflict of interest, between customers and their insurance provider. We take 20%, and the rest (80%) goes to paying claims, and this includes our reinsurance. If less than the 80% is used to pay out claims, for instance 75%, the 5% unclaimed money is donated to charities chosen by customers. The maximum amount that can be given back is 40%. Lemonade gains nothing by refusing a claim. This way we are reinventing insurance from a necessary evil to a social good." DIA: Can you explain how behavioral economics reflects in Lemonade's daily customer experience? Daniel: "Not just our business model but also the whole product flow is informed by behavioral economics. For example, we ask people to sign on the top of the form, not at the bottom. Behavioral research shows that asking people to pledge honesty first results in forms that are actually more accurate." DIA: How does this affect the combined ratio? Daniel: "Multiple ways. For example, we also apply behavioral economics to reduce fraud. In the onboarding process, customers are asked which charity they want the money that is not used for claims to go to, let's say the Red Cross. Now, when at some point in time a customer files a claim, we first remind the customer of the charity he or she selected before diving into the claim. We do that on purpose. To many people, insurance fraud is considered a victimless crime; you're not really hurting someone, at least that is the perception. Research shows that 24% say it’s okay to pad an insurance claim. We're changing that by immediately creating the presence of a victim. Making it crystal clear that a claim harms a charity someone cares about inhibits misuse." DIA: Do you already have proof points that using behavioral economics this way works at a larger scale? Daniel: "Obviously we're a young company, so the amount of claims that we receive are still limited. But we already have early indications that this really works. In the last two months, we actually had six customers who claimed and got paid, but later on returned the money. Someone, for instance, thought his laptop was stolen, claimed and got paid. A few weeks later, it turned out he had left the laptop with his mother-in-law. He then decided to return the money, probably because he didn't want to harm the charity he selected. I would really love to know how many customers of traditional insurers are returning their money." DIA: Insurers need to manage the feelings side of financial services much better than they do today. Quite a few tend to forget that when they are going digital. Others are building hybrid solutions of, for instance, chatbots and human experts. How do you secure the human side in a pure play such as Lemonade? Daniel: “Behavioral economics is one pillar of our business model; artificial intelligence is the other. Thanks to AI, we don’t have to rely on brokers and paperwork. Underwriting and claims handling are taken care of by AI, as well. This makes it even more important to secure that we are recognized as living, breathing people who really care. My co-founder Shai Wininger has a rare talent to marry technology with customer understanding. Our bot has a name. It talks in an approachable manner. It doesn't say, ‘I don't understand.' We know its limits and anticipate the direction in which the conversation is going. Next-level questions are seamlessly moved to our, human, support staff.” See also: Lemonade: World’s First Live Policy DIA: We quite often see that traditional insurance carriers have a strong immune system when it comes to embracing insurtechs. Apparently, different cultures are difficult to match. Sometimes we even see organ rejection. We noticed that the Lemonade team not only incudes tech veterans like yourself but also former executives from AIG and ACE. How do you make that work? Daniel: “When we started thinking about a new concept in insurance, we just had a rudimental understanding of insurance. We had the advantage of being ignorant. We had no preconceived notion. This helped us to question the basic principles of the industry, such as the conflict of interest. "Coming from the outside helped us to rethink, reconceptualize in a fundamental way, from scratch, what Lemonade should be about. "Now, it is only so far you can take that. As soon as you move to execution, you really need to have deeply entrenched insurance knowledge on board. Think of the regulatory maze we have to go through. Then it comes to finding the right people, which was not that easy. We soon realized that we were looking for ‘insiders’ who were ‘outsiders’ at the same time. In our recruitment ad, we actually said it was a requirement to be in the throes of a midlife crisis; not feeling happy in the corner office anymore. They had to buy into our vision.” DIA: We noticed that your fast growth in an market segment that is so difficult to reach by incumbents has led companies such as GEICO and Liberty Mutual to use "lemonade" in their marketing and promotion activities … Daniel: “Ha ha, yes, we’ve noticed that as well, of course. GEICO even introduced a ‘lemonade’ TV commercial at the same time as we launched the company. Liberty Mutual, in fact, introduced a new brand, Lulo, and paraphrased everything, from logo to pricing. "We take it as a compliment that such renowned brands are looking at us, and try to learn and use our ideas. But the examples also show that it is not that easy. Lemonade is more than a logo. You really need to understand the two pillars of our model: behavioral economics and artificial intelligence and how that reflects in the way we operate. And you need to understand that we are really a different kind of company. Obviously, we have duties to our customers, employees and investors. But we’re also a B-Corp, which makes us legally committed to social impact. Our customer base is therefore more like a community of people around a cause – which in turn results in more trust and less fraud. It is about aligning customers and insurer, and giving up underwriting profits. We’re rebranding the insurance sector.”

Roger Peverelli

Roger Peverelli is an author, speaker and consultant in digital customer engagement strategies and innovation, and how to work with fintechs and insurtechs for that purpose. He is a partner at consultancy firm VODW.

Reggy De Feniks

Reggy de Feniks is an expert on digital customer engagement strategies and renowned consultant, speaker and author. Feniks co-wrote the worldwide bestseller “Reinventing Financial Services: What Consumers Expect From Future Banks and Insurers.”

Emerging Technologies

Time to Bust Myths on Cloud Computing

Fallacies include the belief that lifting and shifting applications to the cloud does not work and that sunk costs are unrecoverable.

Michael Costonis

October 5, 2017

Insurers are under increasing pressure to accelerate innovation to keep pace with new disruptive technologies and changing customer behavior. Cloud computing provides a crucial vehicle for much-needed digital innovation. It underpins all the major digital advances insurers need to adopt to satisfy future customer needs and meet long-term business objectives. Innovations as diverse as digital channels, self-driving cars, wearables and advanced analytics systems all depend on cloud technology. See also: Growing Import of ‘Edge Computing’ However, many insurance executives are holding back from embracing the cloud. Around 85% of the executives we canvassed in our 2016 Technology Vision for Insurance survey, for example, agreed that the cloud would foster innovation in their businesses that was not previously possible. Yet, only 49% were investing in comprehensive digital technology programs as part of their business strategies – moves essential to capitalize on the potential of the cloud. Often insurers are stalling a shift to the cloud because of common misconceptions about this powerful technology environment. Some of the reasons they give for their reluctance are:

Lifting and shifting applications to the cloud does not work.
Sunk costs are unrecoverable.
Digital transformation can happen without cloud.

These beliefs are, for the most part, fallacies. Let’s look at the first fallacy: that lift-and-shift doesn’t work. In fact, we’ve already helped some insurers realize 80% savings using the lift-and-shift approach to cloud application migration. In the highly competitive banking sector, Capital One demonstrated the cost-cutting potential of switching to the cloud by migrating most of its critical workload to Amazon Web Services (AWS). The U.S. banking group expects this shift to help it more than halve the number of data centers it requires. In addition to cost savings, moving to a more agile, cloud-based environment provides insurers with the flexibility and speed-to-market that traditional infrastructure cannot match. That’s important, given that more than half the insurance executives we canvassed claim current technology processes are impeding their business objectives. Incremental change to traditional technologies will not solve that problem. A utility-based cloud model is the best way for insurers to improve their flexibility. Furthermore, our research shows that more than two-thirds of insurance executives believe that replacing their legacy technology with something new would be too costly. Yet more than 10% of carriers use no legacy technology at all. While the savings achieved by replacing legacy with cloud-native applications are typically hard to match, we see equivalent gains in some lift-and-shift scenarios, such as migrating development and test environments to cloud workloads. See also: ‘Core in the Cloud’ Reaches Tipping Point In my next post, I’ll address the common fallacy that sunk costs cannot be recovered if companies move to the cloud. In the meantime, have a look at this link. I think you’ll find it useful. Eighty percent reduction in insurance carrier costs? Cloud as rainmaker. This article was written by Daniel Presutti.

Michael Costonis

Michael Costonis is Accenture’s global insurance lead. He manages the insurance practice across P&C and life, helping clients chart a course through digital disruption and capitalize on the opportunities of a rapidly changing marketplace.

Going Digital

How Is Marine the Heart of Insurtech?

As with many parts of insurtech, the underlying driver is the move from pure risk transfer to risk mitigation, and from prevention to prediction.

Sam Evans

October 5, 2017

Who would have thought marine insurance would be at the center of the insurtech revolution? The relationship between insurtech and marine insurance is not an obvious one for many people.

Marine is one of the oldest and most traditional classes of business, the origins of Lloyds of London, when from 1686 members of the shipping industry congregated in the coffee house of Edward Lloyd to arrange early forms of marine insurance.

However, two recent announcements firmly place marine in the center of the technology revolution affecting insurance.

First, Maersk announced they are building a blockchain-based marine insurance platform with EY, Guardtime, Microsoft and several insurance partners. Second, a U.K.-based technology company, called Concirrus, announced the launch of the first AI-powered marine insurance analytics platform.

At Eos, this was not surprising.

See also: Insurance Needs a New Vocabulary

In the first half of 2017, as part of our thesis-driven investment approach, we highlighted commercial insurance as a key area of focus and within that our first product vertical to focus on was marine insurance. What led us to this conclusion?

Commercial marine insurance is a $30 billion premium market, it’s complex and fragmented, and through our analysis we identified a significant potential shift in profit pools over the next few years. Importantly, the emergence of IoT and other devices has created a wealth of data within the industry. Marine also sits at the heart of global supply chain logistics.

During our deep dive into the sector and having spoken with more than 40 market participants across various parts of the value chain, it became apparent that marine insurers (and shippers) have never had so much data (internal and external) available to them, and many don’t have the tools or skill set to take advantage of it.

Growing competition, underwriting capacity and downward pressure on pricing has given little room to maneuver, but we were intrigued and kept digging.

The ability to gather and analyze these new information sources is helpful, but more important will be driving actionable insights through well-informed decision making based on high-quality, real-time data and analytics to improve risk selection, pricing and claim management while helping the insured better manage risk. As with many parts of insurtech, the underlying driver is the move from pure risk transfer to risk mitigation, and from prevention to prediction.

The creation of marine analytics solution platforms provide tailored insights to users, which is an important first step. Currently, software and tech providers to the marine industry are fragmented, with no dominant vendors and no joined up, end-to-end solutions.

As the market matures, the ability to harness analytics capability at the front end with improved efficiency at the back end through blockchain or other initiatives creates an even more compelling story and is an area we will be watching with interest.

Sam Evans

Sam Evans is founder and general partner of Eos Venture Partners. Evans founded Eos in 2016. Prior to that, he was head of KPMG’s Global Deal Advisory Business for Insurance. He has lived in Sydney, Hong Kong, Zurich and London, working with the world’s largest insurers and reinsurers.

Commercial Lines

5 Best Practices on Injured Workers

Using the “injured worker comes first” principle as a true north improves claim outcomes, costs and workplace productivity.

Laura Gardner

October 5, 2017

Putting the injured worker first is key to the “advocacy-based claims model,” which puts the worker at the center of all activity. Until now, most employers have focused on corporate outcomes, with goals such as cutting costs and reducing days lost. But experts now say focusing on the worker can improve all outcomes. The stories of three injured workers provide an opportunity to see the importance of focusing on the injured worker. Take Melanie. Melanie was working as a lifeguard for the summer at a recreational center. She slipped on some wet pavement that had been targeted for cleanup but not yet addressed. She fell on one knee, sustaining a shattered patella and a deep laceration. Melanie needed immediate surgery for the laceration. She initially was put into a brace to stabilize her patella but was told by a different provider that she didn’t need the brace. She recalls feeling like there was a lot of uncertainty around how to treat her shattered patella. One provider told her he could wire it together with surgery; another said surgery would be a mistake. Ultimately, after a delay of almost a year, during which she was unable to work, she was referred to physical therapy. Melanie found the physical therapy helpful in enabling her finally to go back to work. However, she was left with a great deal of concern about the future of her knee and the possibility of late-onset complications. She was also upset about the long delay before she could start physical therapy. Because of this uncertainty, and to ensure that her knee would be taken care of regardless of what happened to it in the future, Melanie retained an attorney to help her obtain lifetime medical benefits for her knee. Her claim is still open. See also: Perspectives From Injured Workers Amy’s story has a bit of a different take. Amy was working as an administrative assistant for an apartment complex. A large number of boxes were delivered to the office and were stacked up against her desk, such that she couldn’t leave her desk area without climbing over the boxes. She asked her manager to move the boxes several times, but they were not moved. At one point, while climbing over the boxes, she fell and injured a knee. Amy reported the injury to her supervisor, who wanted her to go immediately to a hospital emergency room. Amy did not want to wait in an emergency room and successfully argued in favor of seeing an orthopedist the next day. The orthopedist obtained an MRI of her knee that showed both old, long-standing damage and newer areas of injury consistent with the fall Amy had just sustained. However, the day after her injury, Amy’s employer fired her. The payer in Amy’s case tried to deny the claim based on the older damage in Amy’s knee. Amy did not deny that she had damage from years of being a dancer, but she felt it was the newer damage that was limiting her mobility, as she had previously been able to exercise and now had too much pain in the damaged knee. She simply wanted the payer to pay for a few sessions of physical therapy, but the claim denial coupled with being fired left her with no resources to pay for physical therapy. Amy found the claims adjuster hostile and inflexible. She felt betrayed by both her former employer and the payer for her claim. She retained an attorney to fight the claim denial. Eventually, the claim was accepted, and Amy was given several sessions of physical therapy. By the time this came to pass, Amy was suffering pain in the other knee because of having to favor the injured knee. What could have been resolved within a limited time had morphed into a time-lost claim with the need for extended physical therapy. Last, there is Arthur. Arthur was employed as a consultant for a nationally known consulting firm. One day, he was carrying some boxes filled with reports when he dropped a pen and tried to pick it up without dropping the boxes. As he twisted his body to try to pick up the pen, he felt a “pop” in his back and fell to the floor in pain. After a minute or two, he was able to get up without assistance, but the pain in his back remained. Arthur was knowledgeable about the workers’ comp system and decided to file a claim. His pain was persistent and intrusive, but Arthur was still able to work, so his was a “medical-only” claim. Arthur told the claims adjuster that he wanted to see his own physician, with whom he already had a relationship. He alluded to wanting “to avoid retaining an attorney if at all possible.” After an MRI, Arthur’s physician told him that he now had a protruding disk that he was going to have to deal with for the rest of his life. Arthur’s physician gave him the evidence-based statistics about the success rate of surgery for a protruding disk, which were not good, and recommended that he avoid surgery and deal with his problem with stretching and physical therapy. Arthur told the claims adjuster that he preferred to have physical therapy over surgery. The claims adjuster not only approved the physical therapy but also, unsolicited, ordered a special desk chair for Arthur to use in his home office. Arthur felt well taken care of, and after six months of following the regimen his physical therapist had designed, Arthur’s back pain resolved, and his claim was closed. He had not needed an attorney and was extremely satisfied with how his claim had been handled. What can these three journeys tell us about how to put the injured worker first? Here are five best practices:

Ensure the injured worker is educated about the claims process and what to expect. One of the most common reasons why injured workers retain an attorney is because they are worried about whether their claim will be accepted and their bills paid. Reducing uncertainty and fear on the part of the injured worker improves his or her engagement in the treatment process and reduces the attorney involvement rate, which improves quality of care and reduces cost.
Use technology to facilitate the injured worker’s interactions with other stakeholders, from the initial reporting of the injury (think mobile app, direct self-reporting of injuries) to selection of the right physician and finally to the collection of feedback from the injured worker on treatment. Technology is a powerful tool to provide high-quality, personalized, yet cost-effective service. However, it needs to be backed up by strong operational processes.
Encourage injured workers to plan on returning to work right from the beginning. This means helping them select the right physicians proven to have good outcomes and encouraging them to be partners with their treating physicians in choosing wisely among treatment options. For example, there are several physicians who are waging an admirable fight against the opioid epidemic and pushing for more holistic pain-management techniques. We need to send more injured workers to them instead of physicians who have been proven to encourage opioid use.
Trust the injured worker to want to return to work as soon as possible. Most injured workers honestly want to recover, not to game the system. We need to go with that assumption upfront. A good marriage of Math+Trust can help reduce attorney involvement in claims from 13% to 4%.
Stay in close contact with the injured worker; keep the lines of communication open. Use this opportunity to determine if there are any treatment delays that can be mitigated or any questionable treatments that are being recommended. Expectations on communication speed have increased in this constantly connected world. We need to be as close to them as possible throughout their journey to recovery.

Gently guiding the injured worker to the best possible course of treatment will optimize outcomes, improve injured worker satisfaction and minimize costs. See also: 3 Reasons to Talk With Injured Workers The primary purpose of the workers’ compensation system is to get injured workers back on track rapidly. As an industry, it’s time we realigned ourselves toward that goal. Using the “injured worker comes first” principle as a true north improves claim outcomes, lowers costs and improves workplace productivity. No longer do you need to make false trade-offs between cost and quality, cost and speed, etc. Just focus on getting the worker back on his or her feet fast. All operational metrics will follow.

As first published in Claims Journal.

Laura Gardner

Laura B. Gardner is chief scientist and vice president, products, CLARA analytics. She is an expert in analyzing U.S. health and workers’ compensation data with a focus on predictive modeling, outcomes assessment, design of triage and provider evaluation software applications, program evaluation and health policy research.

AI & Machine Learning

The AI Paradox: A Troubling Implication

We will be expected to turn over the controls to AI-based machines while recognizing that the AI in use, at least today, can be unreliable.

Mark Breading

October 4, 2017

Listen to the pundits and self-described experts, and you get the impression that artificial intelligence is taking over the world. Our cars will drive themselves, our buildings will optimize their energy, accidents will be avoided and we will be afforded every manner of convenience. Everything around us will be smart – looking out for our best interests, automating everything, providing new services and generally making life wonderful. Many emerging technologies will have to come together to realize this vision, but perhaps artificial intelligence (in all its various forms) is the lynchpin. This all sounds fantastic – and creates some great opportunities for the insurance industry to help policyholders reduce risks and improve their health and well-being. But dig a little deeper and you’ll discover a paradox – we will be expected to turn over the controls to AI-based machines while recognizing the fact that the AI in use, at least today, can be unreliable. Everyone has their own favorite examples of tech gone awry, and these examples are not meant to tar all AI-based systems with the same brush. But let me offer a few examples from everyday life to illustrate that. while many actually work quite well, there are enough that stumble to cause more careful consideration to how AI should be used for critical applications. See also: Underwriting Lessons From the PGA AI-Based Meeting Schedulers Interacting with bots via email to quickly schedule meetings can lead to frustration. What seems like a simple request that any person would understand is often misinterpreted by the AI-based schedulers. I’ve seen many instances where emails were sent back and forth multiple times, each with increasing layers of confusion, just to get the right people on the right call at the right time. Voice Assistants Voice communications are poised to become the major way that humans interact with computing devices. Tremendous progress has been made in the accuracy of speech recognition and natural language processing. While the progress has been terrific and the accuracy rates are now approaching that of human understanding of speech, there are still enough errors that we should be cautious. To illustrate this point, I provide the following humorous examples. As humorist Dave Barry is fond of saying, “I am not making this up.” What I said in a post about autonomous vehicles: “… as more personal vehicles are embedded with AI…” How Siri translated it: “…as more personal vehicles are in bed with a guy…” Another prime example is the word "insurtech." I would not expect this to be translated correctly at first, but after correcting Siri hundreds of times, I still get "and shirt tech," or "ensure text" or my personal favorite: “I’m sure Texas.” I do find that my Amazon Echo device, Alexa, is generally good at interpreting a request, although one of the most common responses I get is: “Hmmm, I don’t know that.” With my car navigation system, I have given up trying to voice dial my wife, Deanna, and certain other individuals because the names are never recognized, and I sometimes trigger a call to someone in Asia! These are light examples of how a small error in interpretation can significantly alter the original meaning. In the examples I’ve provided, the errors were harmless and easily fixed. But what does this mean for the vision of the connected, intelligent, autonomous world? And what does it mean for insurers? See also: Seriously? Artificial Intelligence? I believe the power and potential of AI is tremendous and will yield astounding benefits for the world. We will be able to dramatically reduce vehicle accidents and reduce or avoid machine breakdowns and property damage. We will be able to assist the elderly and disabled to live independently, improve personal health and extend lifespans. All of this is possible and will be enabled by AI, working in concert with other emerging technologies like the IoT, robotics, wearables and others. But we do need to be circumspect regarding this AI-fueled future. Asking the status of a flight or requesting a song is one thing … but controlling high-value machinery, healthcare devices or moving vehicles is quite another. Insurers should monitor the progress of AI, pilot and experiment with various types of AI technologies and consider the possible positive and negative implications of a broader usage of AI. The real questions are about timing and whether businesses and individuals will have the restraint and governance to wisely use AI-based solutions for the mission-critical and life-critical uses that are being contemplated.

Mark Breading

Data Analytics

10 Trends on Big Data, Advanced Analytics

Big data is getting bigger and faster. We will not be able to generate meaningful insights without advanced analytics and artificial intelligence.

Anand Rao

October 4, 2017

Recently, I was invited to present on the impact of big data and advanced analytics on the insurance industry at the NCSL Legislative Summit. This talk couldn’t have been timelier, as the insurance sector now tops the list of most disrupted sectors. Some of the culprits and causes for this top spot are related to the speed of technological change, changing customer behavior, increased investments in the insurtech sector and new market entrants, such as homeowners and renters insurance startup Lemonade. A significant driver of this disruption is technological change – especially in big data and advanced analytics. See also: Why to Refocus on Data and Analytics Here are 10 key trends that are affecting big data and advanced analytics – most of which have a hand in disrupting the insurance industry:

Size and scope – Big data is getting bigger and faster. With connected cars, homes and buildings, and machines, the amount of data is increasing exponentially. Investments in IoT and Industrial IoT, 5G and other related areas will only increase the speed and amount of data. With this increased volume and velocity, we will not be able to generate meaningful insights from all of this data without advanced analytics and artificial intelligence.
Big data technology – Big data technology is moving from Hadoop to streaming architectures to hybrid “translytical” databases. While concepts like “data lakes” and NoSQL databases mature, new technologies like Apache Spark, Tez, Storm, BigTop and REEF, among others, are creating a constant flow of new tools, which adds to a sense of “big data in flux.”
Democratization – The democratization of data, business intelligence and data science is accelerating. Essentially, this means that anybody in a given organization with the right permissions can use any dataset, slice and dice the data, run analysis and create reports with very little help from IT or data scientists. This creates expectations for timely delivery, and business analysts can no longer hide behind IT timelines and potential delays.
Open source movement – The open source revolution in data, code and citizen data scientist is accelerating access to data and generation of insights. Open source tools are maturing and finding their way into commercial vendor solutions, and the pace of open source tool creation is continuing unabated; the Apache Software Foundation lists more than 350 current open source initiatives. This steady stream requires data engineers and data scientists to constantly evaluate tools and discover new ways of data engineering and data science.
Ubiquitous intelligence – Advanced analytics – especially various types of artificial intelligence areas (reference to my AI report post) – is evolving and becoming ubiquitous intelligence. AI can now interact with us through natural language, speak to us, hear us, see the world and even feel objects. As a result, it will start seamlessly weaving itself into many of our day-to-day activities, such as using a search engine or sorting our email, recommending things to buy based on our preferences and needs, seeing the world and guiding us through our interaction with other people and things without our even being aware of its doing so. This will further heighten our sense of disruption and constant change.
Deep learning – Deep learning, a subset of the machine learning family (which itself is just one area of AI), has been improving in speed, scale, accuracy, sophistication and the scope of problems it addresses. Unlike previous techniques, which were specific to the different type of data (e.g., text, audio, image), deep learning techniques have been applied across all different types of data. This has contributed to reduced development time and greater sharing and broadened the scope of innovation and disruption.
MLaaS – Machine learning, cloud computing and open source movement are converging to create Machine Learning as a Service (MLaaS). This not only decreases the overall variable costs of using AI but also provides large volumes of data that the machine learning systems can further exploit to improve their accuracy, resulting in a virtuous cycle.
Funding – Big data funding peaked in 2015. However, funding for artificial intelligence, especially machine learning and deep learning, has continued to attract increasingly significant investments. In the first half of this year, more than $3.6 billion has been invested in AI and machine learning. This increased funding has attracted great talent to explore difficult areas of AI that will be disruptors of the future economy.
Center of Excellence: As organizations continue to obtain good ROI from their initial pilots and proof-of-concepts in analytics, automation and AI efforts, they are increasingly looking toward setting up centers of excellence where they can train, nurture and grow the talent. The exact role of the center changes based on the overall organizational culture and how the rest of their business operates – centralized, federated or decentralized.
Competitive landscape – The big data landscape continues to grow, and the AI landscape is expanding rapidly. Deep learning companies are growing the fastest across multiple sectors. Competition among startups – as well as incumbents that want to stay ahead of potential disruption – is creating a vibrant ecosystem of partnerships and mergers and acquisitions that further the disruptive cycle.

See also: Analytics and Survival in the Data Age Are there other trends you would add to the list? Share them here!

Anand Rao

Anand Rao is a principal in PwC’s advisory practice. He leads the insurance analytics practice, is the innovation lead for the U.S. firm’s analytics group and is the co-lead for the Global Project Blue, Future of Insurance research. Before joining PwC, Rao was with Mitchell Madison Group in London.