Headlines can have direct bearing on the world of data and insight —and this has been even more frequent in recent years. This, increasingly, including topics like data monetization. One such story was the news that Facebook was preventing Admiral Insurance (in the U.K.) from using social-media-activity data as a means of assessing risk. Admiral planned to enable Facebook users to not only log on with their Facebook ID but to also opt in to giving Admiral access to their data in return for potentially lower car insurance premiums. Given the higher cost of car insurance for younger drivers, the idea had real appeal. However, it appears that, at the last minute, Facebook announced that it is not willing to allow such data from its users to be shared with Admiral, citing data privacy concerns. (If you missed it, the full BBC news report is here.) Why should such news matter to customer insight leaders? This dispute gets to the heart of a new battleground for both service providers and those collecting significant amounts of user-provided and user-generated data/content. See also: 5 Predictions for the IoT in 2017   The issue at stake Sadly, this appears to be another example of today’s data barons relying on an old-style command-and-control mindset. To reach the potential for greater data democracy, we need to see a move in corporate culture toward greater collaboration and transparency. We may never know the rights and wrongs of Admiral’s negotiations — like whether or not it was naive in failing to contractually lock down access to the required APIs. However, Facebook’s behavior still appears to be heavy-handed and conveys an arrogance in regard to data ownership that is disappointing. But then, perhaps, the leopard, which thought it was fair to experiment on users without permission, has not really changed its spots. It is an interesting object lesson for other firms aiming to create value from social data and data sharing between businesses. Customers should own their own data The core of my concern, however, comes from a customer perspective. As more and more firms — from Admiral to TripAdviser — are looking at data-monetization plans, firms should remember whose data it is. Hiding behind fine words about protecting privacy does not mask how consumers are being denied decision-making power about their own data. It is my hope that truly customer-centric organizations can learn from this bad example. People deserve to be educated about the reality of data monetization in our changing world. Many applications, with permission, will have the potential to make peoples' lives easier or to save them money (for the price of their data). Infantilizing customers by deciding what is to be allowed is “Nanny State” thinking. What our industry and our society needs, instead, is clear communication that gives people the opportunities and choices of what should happen with their data. I suspect many young drivers would have chosen to share their Facebook data with Admiral in return for cheaper premiums. Changing mindsets, thinking in terms of customers as more active data owners, also happens to be the best mindset to adopt in preparing for GDPR. A controversial issue It has been interesting to see how this Facebook-Admiral item has divided opinion. The active hub My Customer promptly ran an opinion piece (to which I contributed toward the end of the article). As you can see, there are strong views on both sides. See also: How to Turbocharge a Marketing Budget   I see the need to raise awareness about social media data being used by other companies. Too many conferences laud the potential of big data without an equal emphasis on data protection and permission-based marketing. But I still come down on the side of giving the customer the choice. Closing reflections Let’s just reflect on the fact that this might be an example where a U.S. tech giant is not embracing the free market and the U.K. insurer could be the customer's champion. Strange times, indeed… Let us know if there are other news stories that have grabbed your attention or on which you’d like to know the Customer Insight Leader view.

Everyone knows the bulk of workers’ comp costs now are medical. Claims reps and nurse case managers handle injured workers and their medical costs with utmost care. Anecdotes show that their work saves time and money. The problem is that concrete evidence of their value has been elusive—until now. How can costs avoided and time saved be measured? The measurements are like rabbits pulled from a magician’s hat. What really happened? Quantifying what did not happen is usually impossible. However, quantifying and measuring savings is completely feasible through a different approach, using predictive analytics. The workers’ comp industry does not readily embrace change or innovation. That is changing as pressure increases to become more efficient to sustain profitability as resources shrink. The best approach to meeting this challenge is incorporating advanced technical strategies such as predictive analytics that are designed to support and streamline the business process and make workers smarter. The collateral benefit is being able to objectively measure and report savings. The solution is to extensively analyze the organization’s historic data using predictive analytics and deliver the insights in the form of actionable information to all the stakeholders, including claims reps, medical managers and other decision-makers. Just a few steps are needed, including data analysis, data monitoring, informing and integrating the efforts of stakeholders and measuring the savings. The first and most critical initiative is analyzing an organization's historic data using predictive analytics methodologies -- because each organization has unique internal and culture processes regarding claims handling and medical management, using others’ data, regardless of how large the database, can mislead. See also: 2017 Issues to Watch in Workers’ Comp Situations and conditions found in the past are likely to recur. Once the risks are identified in historic data, they can be searched programmatically in current data through continuous data monitoring. When problematic situations occur in the data, appropriate responses and interventions are mobilized immediately. The insights are delivered to medical management stakeholders, including claims reps, medical case managers, senior management and others as appropriate. The knowledge delivered is structured to assist them in decision support and coordinating efforts. Risk information in claims is delivered concurrently to stakeholders so they can make early and sound decisions, then initiate appropriate action. Importantly, all medical management participants receive similar information so initiatives are coordinated and integrated, thereby implementing strong, multi-disciplinary approaches. When risk conditions in claims are identified in this manner, reserves in that claim need attention, as well.  When events and conditions in claims change, indicating a need for more intense medical management, reserving should also be addressed. Based on predictive analytics, the probable ultimate medical costs are projected and portrayed for claims reps, thereby providing key knowledge to support appropriate action. Data monitoring identifies claims with risk conditions concurrently and informs the stakeholders immediately. Intervention efforts are coordinated among claims reps, medical case managers and others, providing broad-based, integrated initiatives leading to improved results. Savings are gained through proactive, coordinated intervention by professionals who are offered key information for decision support making them accurate, efficient, and effective. See also: On-Demand Workers: the Implications When claims are closed, objective savings are measured by comparing projected performance based on predictive analytics with what was accomplished through active, integrated initiatives across all medical management participants. The calculations are quantifiable and objective. The simplest and most rewarding approach is to outsource this process to a knowledgeable medical analytics company. Internal processes need not change, but professionals and business processes are made more accurate and efficient—a win for the organization, its employees and its clients. Technology is far less expensive than people. When it is designed to assist professional workers by making them more accurate and efficient, the return on investment is profound.

Medicare Set Asides (MSAs) are a critical component of many settlements. After settlement, the injured party must spend, track and report the MSA carefully according to guidelines provided by the Centers for Medicare and Medicaid (CMS):

1. Funds will be deposited in a separate interest-bearing account.
2. All treatments and prescriptions need to be verified as being related to the injury and covered by Medicare.
3. All expenses, treatments, dates of service and related ICD- 9/10 codes must be tracked annually; reporting must be sent to CMS.
4. Bills must be paid according to the specific state workers’ compensation fee schedule or “usual and customary” pricing.

Reporting is complex, and, if the injured party fails to report properly, he runs the risk of having Medicare benefits denied. Additionally, paying retail rates for medical treatment can mean he is not abiding by the guidelines and will quickly run out of funds. For this reason and more, many rely on professional administration services, like Ametros’ CareGuard service, to help manage their medical bills and reporting. Additionally, these services help save the MSA money by securing discounted rates for medical treatments. Let us describe some of the most common mistakes, so your injured party can make an informed decision about how to best manage settlement funds. 1. Overpaying When an injured party handles MSA funds on her own, she pays retail prices on drugs, doctor visits, procedures and medical equipment. In most states, Medicare guidelines indicate that the injured person should pay the lower state fee schedule for treatments — even after settlement. However, doctors and providers do not know how to bill at the correct rates. If the injured party does not demand to be billed accurately, she will be overpaying! We find that, on average, the fee schedule is 55% below what doctors actually bill. Why should someone pay $100 for a doctor visit instead of $45? A professional administrator ensures that the injured person pays the required price on the fee schedule — and, often times, even less. 2. Assuming that, when funds run out, Medicare or private insurance will automatically cover 100% of healthcare costs The settlement process has many moving parts. Often, we find that injured parties are told that, when their MSA funds exhaust, Medicare or private insurance will kick in and pay for everything. This is a huge misunderstanding. The injured party is responsible for copays and deductibles after funds exhaust. The injured party also needs to be enrolled in Medicare or private insurance and pay the premiums. If she is enrolled in a plan when funds run out, insurance/Medicare will begin picking up the bills, but she will still need to contribute copays, deductibles or coinsurance. Typically, she is expected to contribute around 20% of medical costs. It is important to have a professional administrator to ensure that an injured party does not overpay on medical expenses and never has to use personal funds once MSA funds are exhausted. See also: How Medicare Can Heal Workers’ Comp   3. Failure to enroll in Medicare or personal insurance altogether Many injured individuals assume that having an MSA means they are on Medicare automatically. This is not the case. The injured individuals still need to enroll in Medicare or private insurance to have coverage if their funds run out. While Medicare Part A (emergency visits) does not require enrollment, parts B (regular doctor visits), C (private Medicare plans) and D (prescription drugs) all have monthly premiums. Medicare requires that they enroll in plans B, C or D. If they do not enroll in a plan, when their MSA funds exhaust, they will have to pay 100% of their healthcare costs. At Ametros, we also offer extra insurance protection with Medicare supplement plans. 4. Believing that Medicare will play some part in managing the billing of the MSA After settlement, Medicare will not receive the injured person's bills and verify information. A professional administrator will do this, but, if the person is managing his funds on his own, it is his responsibility. Many injured individuals wrongly assume their medical bills will go directly to Medicare after settlement, and the MSA is used for copays or deductibles. This is a dangerous misunderstanding, as Medicare will most likely reject paying for these treatments, and injured parties may be underestimating the true cost. As long as they have funds in their MSA, they are responsible for collecting bills and paying for them IN FULL. Medicare will rely on their annual reporting to see that they did the right thing. Only once their MSA is exhausted will Medicare contribute, and they will be responsible for just the copays. 5. Using MSA funds to pay for medical expenses that are unrelated to the injury or not covered by Medicare Many view their MSA as a pool of funds they can use for their general medical care related to their injury. In reality, Medicare’s guidelines are very specific. Medicare requires they only use the funds to pay for the entire cost of medical treatments that are 1) related to the injury and 2) would be covered under Medicare. A professional administrator verifies that each medical expense is eligible and will go the extra mile with doctors to document that each treatment and prescription is related to the injury. Our team receives constant questions about whether medical treatments meet both requirements. It is important that the injured party’s doctor verifies that medical treatments are causally related to their injury — for instance, a knee injury may trigger a hip problem that requires surgery. When the problem is related to the injury and Medicare would cover the treatment, it should be paid for with the MSA. It’s best to document this chain reaction so that, if Medicare has questions, the patient has all records on hand. It’s equally important to verify that Medicare would cover the expense. Oftentimes, injured individuals are caught off guard that expenses such as transportation and long-term care facilities are not covered by Medicare. 6. Using MSA funds to pay for copays, deductibles, premiums or administrative fees Medicare guidelines state that MSA funds are not to be used for copays, deductibles, premiums or administrative fees. Some injured individuals purchase Medicare supplement plans for coverage gaps they may run into if their MSA funds exhaust. While this can be a good idea, Medicare does not allow the use of MSA funds to pay premiums for Medicare supplement plans — nor premiums for any other plan (including Medicare Part B, C or D). Medicare also does not allow the use of MSA funds to pay investment advisers or other administrative services. At Ametros, our fee for professional administration always comes from funds that are separate from the MSA funds. 7. Failure to coordinate with providers and pharmacists on which items to bill to the MSA vs. Medicare or private insurance plan Staff at most pharmacies and doctors offices have never heard of an MSA, so there is often confusion about billing. An individual managing her MSA is responsible for making sure each bill is paid properly with the MSA funds and for routing unrelated bills to Medicare or an insurance plan. It may sound simple, but often the injured person will visit the pharmacy to pick up medications that should be covered by the MSA, as well as medications that should go to the health insurance company or Medicare. It’s important to be very specific with healthcare providers and staff to make sure they are separating bills. If the injured person is doing bill administration himself, tracking can be a huge hassle; it’s a challenge to request that the insurance plan reverse bills or try to secure a refund from doctors if bills are routed improperly. See also: Top 10 Mistakes to Avoid as a New Risk Manager   8. Mingling MSA funds with other accounts or investments Medicare requires that funds be placed in a separate, interest-bearing bank account. Oftentimes, injured individuals skip this step. This may not seem like a big deal at first, but, as the account is used for other expenses, it can be a challenge to separate items and produce reporting for Medicare. In addition, depositing MSA funds into a personal checking account means the injured party may use the money incorrectly by accident. Likewise, while Medicare has not given specific guidance on placing MSA funds into investment vehicles, industry experts agree that Medicare will not step in to cover any losses incurred from placing funds into the stock market. 9. Failing to notify Medicare properly when funds exhaust or replenish (if someone has an annuity) Medicare must hear from the injured party every time her MSA funds run out and every time she receives another annuity check to replenish the account. If not, Medicare will not be prepared to cover healthcare if she has exhausted her funds and continues to be treated. Medicare’s self-administration guide has a letter template for every time funds run out and another letter template for every time funds are replenished. Some injured individuals find themselves running out of MSA funds frequently. This means they need to send two letters a year to Medicare (not counting the annual reporting). Another frequent confusion of MSA holders who have annuities is whether they technically “exhausted” their funds because they spent more than their annuity check for that one year. They only need to report exhaustion to Medicare when their aggregate account balance reaches zero. When their account is out of money entirely, they are required to notify CMS. A professional administrator verifies reporting for fund exhaustion and replenishment; this way, the hassle of keeping Medicare up-to-date is taken care of. 10. Failing to report MSA spending to Medicare annually The annual attestation is the most basic requirement of the MSA: Medicare expects to hear from the injured party on the anniversary of the injury, every year for the rest of his life. The only exception is if he has notified Medicare that he has no funds remaining and no future annuity checks. As long as he has MSA funds or expected future annuity checks coming, Medicare will count on the report. Annual reporting to Medicare is the fundamental requirement that MSA holders need to fulfill to ensure their Medicare benefits are protected. Unfortunately, many injured individuals forget the date of their settlement and file their reports late, and some do not file at all. When we take on administering MSAs where injured individuals did not complete their reporting, we usually have to make multiple phone calls, and, often, the injured individual is left waiting for approval for a medical treatment or prescription that Medicare needs to help cover. At Ametros, we’re constantly encountering new issues with MSA accounts, and our team is always adapting to take the burden off the shoulders of the injured individual. After all, injured parties with MSAs have been through enough; they deserve help so they can settle well and remain on the path to better health.

The most successful small commercial carriers have been able to establish highly profitable books of business by cherry picking low-complexity risks that can be efficiently underwritten and processed. These carriers monitor and adjust underwriting decisions at a portfolio level to ensure underwriting discipline and profitability. There has been a focus on building advanced, agent-facing technology, primarily through proprietary portals. This technology streamlines the acquisition and, in some cases, servicing of this highly profitable business to provide incentives to agents to increase their submission flow. However, this strategy has not led to any single dominant carrier in the $60 billion to $90 billion U.S. small commercial insurance market, and increasing competition is threatening the historically comfortable position of market leaders. Several fundamental characteristics of the U.S. small commercial insurance market (e.g., higher retention, lower price volatility, large number of uninsured and underinsured business owners) and renewed optimism in small-business growth have led existing carriers to sharpen their focus on small commercial. In addition, several insurtech startups have entered the market with solutions for underserved customer segments. And, the relatively benign Cat environment has fueled further competition from various types of capital providers (e.g., hedge funds, pension funds, foreign investors, capital markets) looking to diversify their investment portfolio with uncorrelated insurance assets. See also: A Tipping Point for Commercial Lines At the same time, recent pricing pressures and slow organic growth have led many distributors to leverage their positions to improve their placement yield through higher compensation. Limited organic growth opportunities also have led to a broad consolidation of distributors, with an increasingly large number of private equity-backed brokers looking for short-term gains and opportunities to reduce systemic inefficiency. Moreover, mid-market, publicly traded and bank-owned players have effected similar consolidation and focus on operational efficiency. Serial acquirers have sometimes inherited some large books of small commercial business that are expensive to service. To lower costs and simplify operations, these intermediaries have reduced the number of carriers they do business with and abandoned servicing. Distributors increasingly favor markets with broad risk appetite, easy processes for placing new business and minimal servicing requirements. The carriers that will succeed in this rapidly changing landscape will approach the market with an agency perspective and focus on agency economics in addition to their own performance goals. This requires evaluating opportunities to drive economic value across the whole value chain. By shifting their focus from maximizing profitable growth in terms of direct premiums written on their books to maximizing profitable premium under management (both theirs and their distributors), leading carriers can avoid the race to the bottom on price and to the ceiling on commissions. Stretching the limits of automation The obvious starting point is to extend the limits of what can be acquired, underwritten and serviced through a relatively automated model. The “Main Street” small commercial segment, which consists of small, low-complexity businesses with straightforward insurance needs was the first segment that carriers automated. Today, distributors can request, quote and bind “Main Street” business policies in near real time from several carriers that have successfully identified classes of business that have a lower loss ratio and require limited to no underwriting ”touch.” These carriers have established strict guidelines and knock-out criteria for the types of businesses that can pass through, leaving tougher classes to second-tier carriers or non-admitted markets. As access to information currently not captured in traditional apps and artificial intelligence becomes more prevalent, carriers can judiciously loosen restrictions on the risks that need manual review and accordingly increase automation. Confirming underwriting classification and fit with appetite is a common reason for manual underwriting review, and is especially likely for more complex or hazardous classes. Most carriers don’t want to insure general stores that sell firearms or landscapers who climb trees. Referral underwriters must verify the classification and gather additional information by reviewing company websites, or even reaching back out to the agent or customer. Fortunately, third-party data and analytics now can provide this information. This is leading to new risk segmentations and redefining where money can be made. Historically, distributors have (potentially unknowingly) placed the majority of their simple, easy-to-place risks with a few large carriers that can digitally “set and forget” this book. Distributors have struggled to place more complex risks across myriad markets. Classes that are not within the appetite of standard carriers are much more expensive for distributors to place and service. This is especially problematic on smaller accounts. As distributors reassess their portfolios and look to streamline their markets, they will increasingly start using their “Main Street” small commercial book as a lever for carriers to also write their complex small book. Accordingly, carriers must offer solutions for tougher classes, both to meet distributor and customer needs and to increase their own revenue opportunities. Eliminating unnecessary hand-offs There are many hand-offs between the customer, agent and carrier throughout the lifetime of a policy. This creates operational friction that increases costs and compromises the customer and agent experience. In many cases, carriers are in a better position to efficiently and effectively handle the transactions that distributors currently perform or initiate. When it comes to acquisition, real-time quote and bind for low-complexity risks is already table stakes. However, carriers usually require a significant amount of information from the customer and agent to facilitate this process. Current apps are extremely cumbersome to populate, and a new streamlined application process will constitute a fundamental change to the economics of acquiring new business. Imagine being able to enter just four pieces of information about a business (e.g., business name, business address and owner’s name and DOB) and receiving a real-time quote with the option to immediately purchase and electronically receive policy documents. The transaction can even be facilitated via direct integration between the distributor’s agency management system and carrier systems to avoid redundant data entry. Furthermore, imagine this approach being implemented with no impact on underwriting quality or manual back-end processing requirements for the carrier. See also: Commercial Insurers and Super Delegates Leveraging internal data from prior quotes and policies, integrating external structured data feeds and mining a business’ website and social media presence can provide carriers with enough information to determine a business’ operations, applicable class codes, property details, employment, payroll and other key risk characteristics to underwrite and price low-complexity risks. In cases where more information is needed, dynamic question sets with user-friendly inputs can augment the application process without sacrificing underwriting quality. And if the agent wants to negotiate on coverage, terms and conditions or pricing, there can be options for requesting underwriting review, supported on the carrier side by advanced routing that passes the request to the appropriate underwriter based on expertise and agency relationship. These investments are an obvious way for carriers to improve data accessibility, consistency and quality for underwriting analysis, and also increase underwriter productivity. Distributors also benefit from these carriers’ increased efficiency and ease-of-doing business and are more likely to send business their way. Servicing can be another drain on agency resources. The amount of paperwork and transaction flow for small commercial accounts (e.g., requests for certificates, new employees or drivers) is often disproportionate to the amount of premium that they generate. As a result, it is common for carriers to offer service center capabilities. Larger agencies that are looking to streamline their operations most often use these services; in fact, they are often a key factor when agencies look to transfer their book to a new carrier. These capabilities are also appealing to smaller agency owners who may not want to hire an additional customer service representative (CSR) to manage the renewal book. Carriers are typically in a better position to service the book on behalf of the agent because they own the master policy, billing and claims information, have the authority to process changes and have the expertise to address any customer questions or concerns. They also have the scale needed to optimize the process and manage capacity, which they can even leverage to offer servicing and other back-office capabilities for an agent’s entire portfolio (even that written with other carriers), completely eliminating the need for a CSR. Furthermore, seamlessly servicing the business that transfers to another player’s balance sheet can enable another important strategic aspiration: helping new capital providers enter the small commercial insurance game. Renting underwriting acumen As we mentioned, alternative risk-bearing capacity is proliferating. Various categories of capital providers may have an appetite for different risk profiles (e.g., high-volatility, long-tail risks). Some of them may enjoy a higher net investment income ROE and therefore can afford lower underwriting profitability thresholds. However, they still need an underwriter and “A”-rated paper. Currently active fronting arrangements are already providing a more direct link between capital and (currently mostly short-tail) primary risk. Small commercial carriers could “rent” their underwriting expertise via similar fronting ventures and significantly “write” more, including classes of business with a higher loss ratio that may still be attractive to certain capital providers. This would be an effective way to artificially broaden underwriting appetite, leading to improved ease of doing business for distributors. Risk placement of small, complex risks can pose challenges for agents who have to procure and maintain a significant number of appointments, each of which may require distinct and inefficient acquisition and servicing processes. By underwriting risks on behalf of another party, a carrier could earn additional revenue for fronting the business while offering a valuable service to their distribution partners. A carrier that offers services in these three areas could become the one-stop shop for placing small to mid-sized risks for distributors. And if that carrier could continue to offer a competitive compensation package, it would have an outstanding value proposition. Value-added offerings could be part of a strategic compensation package that drives desired agency behavior – for example free servicing on year 1 business if they meet new-business growth goals, or broadened appetite and placement services if they maintain profitability standards. Ultimately, it may be able to fundamentally restructure the economics of providing insurance and ancillary protection services, with tangible benefits to all constituents. See also: How to Win in Commercial Lines   By thinking like a distributor and identifying opportunities across the insurance ecosystem to drive value, a carrier can compete on ease of doing business rather than price – changing the playing field to protect margins and drive profitable growth. This goal would have been difficult to achieve a few years ago, but recent technology advances have made it possible.

In March 2016, the first Future Trends: A Seismic Shift Underway report was published, highlighting that a seismic shift in the insurance industry was underway due to the converging “tectonic plates” of people, technology and market boundary changes. The shift was realigning fundamental elements of business that would require major adjustments from insurers for them to survive and thrive. By the end of 2016, we could make a case that it was a historic year. At no time in the history of insurance can we find one year that includes this many game-changing events and a rapid pace of continuing advancement. A trend at the forefront of the shift was insurtech. Its emergence represented an industry high point for activity, excitement and concern. Commonly, major shifts are punctuated with pauses. For example, with the rise of the internet for business use in the 1990s, or the flurry of IT activity leading up to Y2K, monumental changes were followed by periods where insurers could breathe, adjust and move forward. What became apparent in 2016 is that insurtech advancements and the forces of change may not see any significant slowdown. The momentum that has been building is unstoppable. Industry advancements, cultural trends and IT reactions are gaining speed as they gain strength and a framework for stability. See also: How the Customer Experience Is Shifting   Because insurance industry shifts are in constant flux, decisions based on those shifts must be based on the very latest perceptions. To help, Majesco has issued a Future Trends 2017 report with a fresh set of perspectives and data that will keep insurers abreast of the latest trends. Throughout the report, Majesco also helps insurers consider practical measures for preparation. The Forces of Change The Future Trends reports provide context to a shifting industry by placing trends under three umbrella forces/categories: People, Market Boundaries and Technology. Under each category, major developments are discussed and industry impacts are noted. For the 2017 report, Majesco has expanded the subtopics to include:

• Impacts of economic conditions
• Behavioral economics
• Pay-as-you-need insurance enterprises
• Platform solutions
• Insurtech
• Competition for Talent

The unstoppable shifts become clearer and more relevant when looked at through the spheres of change. People. A changing population, with many members beset by economic challenges, is applying urgent pressure on the insurance industry to develop a new approach to the market; one that demands products and services that are more affordable, tailored to very specific needs, simpler and grounded in trust. These conditions have helped create a “new normal” when it comes to consumers’ and businesses’ risk profiles and expectations. The atmosphere for purchasing decisions is also changing. Insurers need to take a close look at what factors will improve policy uptake in a world dominated by the desire for immediacy. Market Boundaries.  Customer expectations, experiences, loyalties and relationships are continuing to rapidly change, with long-held business assumptions and models being dismantled and replaced with new models, more appropriately aligned to this shift. The traditional boundaries between industries and companies are also being dismantled by technologies that have created platform-based economic shifts. The result is a porous market, where engagement is everything and the relationships between businesses, customers, channels and partners create their own chemistry. It is exciting! But new strategies are needed for everything from product development to back-end administration. Technology.  The rate of emerging technologies will continue, but even more exciting is the rapid adoption and commercialization of these technologies, surpassing many predictions by “the experts,” while catching many traditional executives off guard. Advancing technologies are converging, increasing customer expectations and demands, and access to capital for new technology start-ups is magnifying the extremes – from disruption and destruction to innovation and transformation. Can insurers simply graft these new technologies onto their existing frameworks? It is unlikely. A broader approach is needed. Even insurers focused on replacing their legacy core systems with modern solutions surrounded by digital and data capabilities will need to take a new view and a broader approach to the changes around them to make certain that systems stay aligned with new customer expectations. These expectations highlight a generational gap where traditional insurance business models, processes, channels and products are becoming rapidly irrelevant to a new generation of buyers. Will established insurers suffer at the hands of tech-savvy, culture-savvy competition? Some may, but only if they allow themselves to. Many will re-invent themselves to become the new leaders of a re-imagined insurance business … that meets the needs and demands of a new generation of buyers. They will forge new roads of adaptation and become adept at shifting balance from the traditional old business to the ever-flexible new business. See also: How to Cope With Shifting Appetites   Adapting to the Shift This seismic shift is creating leaps in innovation and disruption, challenging the traditional business assumptions, operations, processes and products of the last 30 to 50 years. The implications for insurers are enormous. To adapt to this shift, the report notes that insurers are charting a path using the following methods:

• Maintain and grow the existing business while transforming and building the new business. The current business is funding the future and needs to be kept running efficiently and effectively as the market shifts.
• Optimize the existing business while building the new business. Optimizing any process will help to maximize the existing business, reduce the cost of doing business and provide a bridge from the past to the future while allowing realignment of resources and investment to the new business.
• Develop a new business model for a new generation of buyers. Create a strategy and plan for a new business model that supports simultaneous leaps forward to create new customer engagement experiences underpinned by innovative products and services that offer growth, competitive differentiation and success in a fast-changing market dynamic.

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 create both a challenge and an opportunity. There is no clear path or destination. The time for plans, preparation and execution is now — recognizing that the customer is in control. 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 that aligns to a rapidly growing millennial, Gen Z and Gen X customer base. For a deeper dive into current insurance industry shifts, and to envision how your organization can take advantage of unstoppable momentum, be sure to read Majesco’s Future Trends 2017: The Shift Gains Momentum.

Insurtech is hot, so the world tells us that VCs and PE firms, large IT companies and a wide range of startups all agree on its prospects. A cynic would, however, say that the worlds of innovation and insurance could hardly be further apart. A financial services industry – by its very nature – has a long-term view, with stability as part of its DNA and solidarity as its backbone. A long-term view does not spontaneously align with the speed, agility and instant nature of today’s society and of innovation. Stability has an uneasy relationship with constant change, and solidarity has to be reinvented to find its place in the personalized customer experience. So which characteristics are most important? Here are six: 1.  Digital DNA – Customer-centric, agile, simple Too often – even in startup designs – we see translations of today’s practices and procedures into a workflow built with new technology. These so-called optimizers have a place in the value chain and can help organizations improve digital access in their current environment. Insurtech should go further: redesign and simplify. Build processes in smaller kernels and connect those rather than "boiling the ocean." Build from scratch. There is no other way for existing insurers or new players than going digital. This trend is as big as automation was in the eighties: a giant leap forward. See also: Top 10 Insurtech Trends for 2017   2.  Instant, Open and Mobile – the new norm for connectivity Please stop debating this; these are all irreversible, societal changes that we see and experience in every walk of life. Insurance is not unique; these laws apply here. Look for omni-channel, use that time to develop an open and mobile solution that is instantaneously available with all relevant context. This is not a generational segmentation. We no longer speak of millennials but of Generation C – the connected customer who reaches across all ages and lifestyles. 3.  Regulation as Opportunity All too often, disruptive startups claim to shy away from the establishment, to make a new market, but even the Ubers of this world have to deal with the rules of law. As much as we may complain about the EU and consumer protection bodies, these same institutions create a massive market and playing field with their new technology. Don’t be shy; study the law and find your niche. At the very least, understand the impact: Making connections and using data for enhanced propositions sounds great, but be sure that things will change after May 25, 2018, in the EU when the GDPR (here is a quick and insightful analysis by Capco) kicks in. Consent will be needed from every single customer or there will be tough penalties of as much as 4% of annual global revenue, or €20 million – whichever is the greater amount. On the other hand, PSD2 creates a totally new and open banking and insurance landscape – make sure to be educated and part of it. 4.  Fair and Acceptable to the World For too long, banking and insurance was primarily the domain of those fully participating in society, preferably with stable financial backgrounds, and the more assets the better the service that one could expect. Customers were "too poor to service" or did not have enough "income potential" to be an interesting target. New technology makes it possible to service every customer in a fit-for-purpose manner: Bank accounts can be as cheap and easy as mobile phone numbers, and the ultra-wealthy can have a 24-hour-a-day virtual concierge. More access to financial services means more economic participation, tax income, business development, financial health and independence and stability. Furthermore, recent debates on tax optimization and wealth gaps together with much more transparency make it clear that it simply is no longer acceptable to not let everyone participate – in a way that suits him or her. What started as a moral and political topic has found a firm place in the investment agenda of PE and VCs, too. 5.  Data: Context Is King Hardly any other industry is as data-rich as insurance; banking pales in significance to the data assets of insurance companies. Silos, warehouses... and data appears in higher volumes by the day. Today, we simply speak of structured and unstructured (social) data, which all carries extreme relevance, but... only at a certain moment in time for a certain person or occasion and in a certain context. The good news is that more than ever can we benefit from the pull effect of the right and interested audience when posting relevant content online. All this and more means only one thing: Data is nothing – context is everything. Despite tools galore, make sure you understand the GDPR (outside Europe, this will most likely become the acceptable norm, too) and build an environment in which the right data can be pulled into that transaction or context to enhance the value for the customer and the relevance to the insurance company. It can be done now! 6.  Embrace the Ecosystem Ownership is out, access is in: access to a wider ecosystem of business partners. You do not have to own or build something yourself to derive value from it. In an open API system, relevant third parties can be your last mile to a new customer segment, or in reverse they pay you for the last mile into your customer basis. Building relevant networks and opening up a network so customers can choose for themselves who they find relevant is the way forward. This speeds up your time to market, your relevance and the richness of the customer experience. Ecosystems can equally be entered into to try out new markets, new customer segments or new vertical offerings. Be aware that, in finding good partners and striking the right deal, the devil is in the detail of the cultural fit. Can large settled companies work with small agile ones? Will your teams be able to align? Culture matters most is one lesson we have already learned in the first few steps we have set in this direction as an industry. The how is as important to success, if not more, than the what. Optimizers, Transformers and Disruptors Our next blogpost will include the other four criteria. But these first six already provide a clear picture. So does everyone have to tick all six boxes to be an insurtech firm? No, but this is a useful framework to position your company, your ambition and your market: to help investors understand what your ambition is, how fast things might go, how much money you might need and what other resources are key. As disruptive as technology and societal changes have been lately, nothing changes overnight in business. Disruptors will come, some will grow and become an established part of a new world, others might fail, having learned a lot. See also: 4 Hot Spots for Innovation in Insurance So take a step back and away from your startup dream of being the change agent of the new world and take a critical look at yourself. There is a lot of space for all types of players to make the transformation we as an industry face. We need optimizers – the players who give the industry tangible short-term benefits on the road to digitization. We need transformers, those that do not change the rules of the game, but that do rethink and redesign workflows, transaction processes and entire business flows. And, yes, we need disruptors to help the industry shape a new (level) playing field with new opportunities in areas no one could foresee. The resources needed, the outlook, the potential of return and the addressable markets differ. Optimizers can become transformers after a few years of experience. Transformers, however, hardly ever become disruptors, the DNA is too different. It has happened, but in a new company with a new team and vision. Embrace the world of insurtech, be honest about your position and aim for 10 stars in your business model. Stay tuned for the other four criteria. See you all in Amsterdam!

Apparently anybody with internet access is now an insurance expert. Recently, I read this article about the miracle and savior that is insurtech: 3 Major Areas of Opportunity It’s a quick read, so I’ll wait until you return… To paraphrase Einstein, “Things should be made as simple as possible, but no simpler.” That's why this statement in the article is inapplicable to insurance:

“The first is customers, who have grown accustomed to an easy, Facebook-like experience in interacting with large service providers.”

Insurance transactions are not equivalent to Facebook “likes.” Technology as a communications tool is fine. I only communicate with my agent via email. It’s easy, it’s 24/7, and it’s documentation of our communication, something that has paid off for me more than once in the last 25-plus years. See also: Top 10 Insurtech Trends for 2017   But technology is only a tool. It’s a means to an end, not an end in and of itself. The insurance purchase cannot (and should not) be reduced to an Amazon-like “1-Click” purchase. Consumers are not buying crew socks or body lotion on the internet, they’re entering into a complex, legal contract that, if not properly executed after identifying their unique exposures to loss, could result in catastrophic financial loss. Lives could be ruined, families destroyed. This is serious stuff, not the subject of goofy box store clerks and prancing lizards. If I make a bad decision buying a Bluetooth speaker online, I might be out $30 or the inconvenience of returning it. If I make a bad decision buying insurance online, I could lose almost everything I own and 25% of my income for the next 20 years. No matter how consumers have grown accustomed to an easy, Facebook-like experience online, there is more to the “insurance experience” than the purchasing component. Just ask anyone who has ever had a significant claim, especially one that didn’t go so well. Then, there’s this in the article:

"New algorithms for predicting risk, for example using machine learning, will allow for vast automation of the underwriting process, and managing contracts and identities with the blockchain will reduce the resources needed for fraud detection."

What it may also enable is “black box” discrimination, even if unintended, because no one knows for sure what those algorithms are using to make underwriting decisions. And, if your insurance premium is based on 600 “big data” factors, how do you know what impact each factor had on your premium or what you can do to control your premium? One might argue, as do data analytics businesses selling their services, that this is somehow good for the insurance company…but what about the consumer? Then we have:

"The second source of pressure comes from competitors. Not only will consumers be more likely to give their business to a digital-native insurer, but entire new kinds of exposure are opening that will give a challenger an opportunity to strike. The cybersecurity market is growing everywhere, along with the pressure to contain and manage the risk better, yet traditional insurers are slow to make convincing offers to threatened customers."

One reason insurers are slow to respond is that developing an insurance premium that is, by law, adequate, not excessive, and not unfairly discriminatory is very difficult to do for a brand new type of exposure or one that is evolving almost daily. If you can’t price the coverage, you can’t determine what the coverage should be or not be. Insurers caught flack for not responding quickly to the Uber phenomenon. According to some, two early insurers that responded with broad, inexpensive coverage quickly took a beating with two $1 million-plus claims because they didn’t understand the exposure, overinsured it and underpriced it. See also: All Insurers Must Become Insurtechs   Technology can be a cool tool, but it is not the be-all, end-all savior or nemesis of the insurance industry. Insurance has always been and will most likely always be a mechanism for assisting consumers and businesses in identifying their exposures to loss and enabling them to manage them without going bankrupt. We must always keep that mission in mind no matter what the revolutionary new idea du jour might be.

Insurers are loosening policy language to allow more treatment for opioid addiction. Treatment centers and providers are opening, expanding and increasing services to meet growing demand. Workers’ comp requires treatment for those addicted to or dependent on opioids, leading to higher costs for employers, insurers and taxpayers. Medicaid will be saddled with much of the burden, as addicts often lose their jobs and have no other coverage – so we taxpayers will foot the bill. We know who’s going to be writing the checks – ultimately you and me and our nations’ employers, in the form of higher insurance premiums, higher taxes and lower earnings for employers. That’s wrong. And not just-kinda-sorta-of-that’s-too-bad wrong, but ethically, morally and maybe even legally wrong. See also: How to Attack the Opioid Crisis   The purveyors of this poison have made billions by lying, deceiving and killing our fellow citizens. By crushing families, destroying towns, bankrupting businesses, ripping apart our social fabric. And we’re left paying the bill in dollars, deaths and soul-searing pain. I have a modest proposal.  Make the pill-pushers pay. Congress should pass a bill, and the president should sign it, making the opioid industry pay for its sins -- treatment coverage, a flat amount for each person who died on their poison and reimbursement for all past costs incurred by individuals, families, taxpayers and employers.  Bankrupt the industry, take every penny the owners have and use it to help those they’ve harmed. Let’s call it the Corporate Opioid Responsibility Payment Service Establishment Act. CORPSE, for short Make the bastards pay.

Smart-television maker Vizio agreed to pay a penalty this month for spying on 11 million customers. According to the Federal Trade Commission, the company captured second-by-second information on what customers viewed, combined it with their gender, age and income and sold it to third parties. How much was the fine for Vizio, which has sales in excess of $3 billion? It was $2.2 million — barely a slap on the wrist. These kinds of privacy breaches are increasingly common as billions of devices now become part of the “Internet of Things” (I.o.T.). Whether it be our TV sets, cars, bathroom scales, children’s toys or medical devices, we are already surrounded by everyday objects equipped with sensors and computers. And the companies that make them can get away with being careless with consumer security — and with stealing customer data. Vizio has been accused of exposing its customers to hackers before. In November 2015, security researchers at Avast demonstrated how easy it was for hackers to gain complete access to the WiFi networks that Vizio’s TVs were connected to and that it recorded customer data even when they explicitly opted out of its terms of service. See also: ‘Smart’ Is Everywhere, but…   On Black Friday in 2015, hackers broke into the servers of Chinese toymaker VTech and lifted personal information on nearly five million parents and more than six million children. The data haul included home addresses, names, birth dates, email addresses and passwords. Worse still, it included photographs and chat logs between parents and their children. VTech paid no fine and changed its terms of service to require that customers acknowledge their private data “may be intercepted or later acquired by unauthorized parties.” Regulations and consumer protections are desperately needed. One option would be to hold the manufacturers strictly liable for these hacks, to financially motivate them to improve product security. In the same way that seat belt manufacturers are responsible for the safety of their products, I.o.T. device makers would be presumed to be liable unless they could prove that they had taken all reasonable precautions. The penalties could be high enough to put a company out of business. But this would be inequitable. One of the factors enabling such hacking is that users don’t use sufficiently complex passwords and thus leave the front door unlocked. It could also stifle innovation, with the big players avoiding the possibility of extreme penalties by becoming averse to innovations, and small players avoiding entering the market because they lack the resources to handle possible litigation. Duke School of Law researcher Jeremy Muhlfelder says that copyright law has a history of Supreme Court cases that have ruled on this exact principle, of not wanting to curb the “next big thing” by holding innovators liable for their innovations. Innovators themselves wouldn’t, and shouldn’t, be liable for how carelessly their innovations are incorporated into new products. But imposing strict liabilities on manufacturers, because it would lead indirectly to canceling the rewards of innovation, might not be legally realistic either. A more reasonable solution may be along the lines of what attorney Matt Sherer recommends in a paper on regulating artificial intelligence systems that was published in the Harvard Journal of Law and Technology: Impose strict liability but with the potential for pre-certification that removes the liability. I.o.T. devices would be deemed inherently dangerous, and thus the producer would be strictly liable for faults unless an independent agency certifies the devices as secure. This would be similar to the UL certification provided by Underwriters Laboratories, a government-approved company that carries out testing and certification to ensure products meet safety specifications. See also: Why 2017 Is the Year of the Bot   Equipment certification is also one of the recommendations that former Federal Communications Commission chairman Tom Wheeler made in a letter to Sen. Mark R. Warner (D-Va.) regarding the government’s response to the October 2016 attack on the internet. He proposed a public–private partnership that creates a set of best practices for securing devices, the certification or self-certification of products, and labeling requirements to make consumers aware of the risks. Wheeler proposed “market-based incentives and appropriate regulatory oversight where the market does not, or cannot, do the job effectively.” As Wheeler also noted, addressing I.o.T. threats is a national imperative and must not be stalled by the transition to a new president. This is beyond politics. It is a matter of national security and consumer safety.

Imagine if you could pick between Uber drivers based on their driving experience. Would you hire an experienced driver who has logged hundreds of thousands of road miles or one who has driven just a few hundred miles? I’ll bet you’d go with the experienced driver. Now apply the same question to driverless cars. How would you pick? The same logic applies: Go with experience. By the miles-driven heuristic, recent reports released by the California Department of Motor Vehicles show that Waymo (the new Alphabet spinout previously known as Google's Self-Driving Car program) is running laps around its competitors. As with human drivers, experience matters for driverless capabilities. That’s because the deep learning AI techniques used to train driverless cars depend on data—especially data that illuminates rare and dangerous “edge cases.” The more training data, the more confidence you can have in the results. See also: How to Picture the Future of Driverless   In 2016, Waymo logged more than 635,000 miles while testing its autonomous vehicles on California’s public roads compared to just over 20,000 for all its competitors combined. As the W. Edwards Deming principle that is popular in Silicon Valley goes, “In God we trust, all others bring data.” The data shows that Waymo is not only 615,000 miles ahead of its competitors but that those competitors are still neophytes when it comes to proving their technology on real roads and interacting with unpredictable elements such as infrastructure, traffic and human drivers. Now, there are lots of ways to cut the data and therefore a lot of provisos to the simple test-miles-driven heuristic. Waymo also leads the others in terms of fewer “disengagements,” which refers to when human test drivers have to retake control from the driverless software. Waymo's test drivers had to disengage 124 times, or about once very 5,000 miles. Other companies were all over the map in terms of their disengagements. BMW had one disengagement during 638 total miles of testing. Tesla had 182 disengagements in 550 miles. Mercedes-Benz had 336 disengagements over 673 miles. Fewer miles might mean fewer edge cases were encountered, or it might mean that those companies tested particularly difficult scenarios. But, low total miles driven casts doubt on the readiness of any system for operating on public roads. Until other contenders ramp up their total miles by a factor or 1,000 or more, their disengagement statistics are not statistically relevant. Tesla fans could rightly point to the more than two hundred million miles that Tesla owners have logged under Tesla’s Autopilot feature. Those miles are not considered here. (Autopilot is not defined as autonomous under California law, so Tesla is not required to report disengagements to the California DMV.) But, no doubt, all those miles means that Tesla’s Autopilot software is probably very well trained for highway driving. What do those highway miles tell us about Tesla’s ability to handle city streets, which are more complex for driverless cars? Not much, but the 550 miles that Tesla did spend on public road autonomous testing speaks volumes about its dearth of experiential learning on city streets. (Ed Niedermeyer, an industry analyst, recently argued that most of Tesla's 550 miles were probably logged while filming one marketing video.) See also: Novel Solution for Driverless Risk   It should also be noted that the reported data applies only to California; it does not account for testing in other active driverless hubs—such as Waymo’s test cars in Austin, TX, Uber’s driverless pilots in Pittsburgh or nuTonomy’s testing in Singapore (just to name a few). It is safe to guess, however, that a significant percentage of all autonomous testing has been logged in California. Notably missing from the reports to the California DMV are all other Big Auto makers and suppliers—and other players cited or rumored as driverless contenders, like Apple and Baidu. They might well be learning to drive on private test tracks or outside of California. But, until they bring data about their performance after significant miles on public roads, don't trust the press releases or rumors about their capabilities. Waymo’s deep experience in California does not guarantee its victory. Can it stay ahead as others accelerate? That remains to be seen, but it is clear from the California DMV reports that Waymo is way ahead on the driverless learning curve.