We are facing an epidemic that is only going to get worse – the scourge of cyber and telephone-based scams against individuals and businesses. Scammers are becoming so sophisticated that it is difficult for even the most educated and tech-savvy individuals to avoid being conned. It is actually difficult to find someone who has not fallen for some kind of scheme that resulted in stolen money or a stolen identity.

These highly sophisticated and organized criminals are now able to assemble substantial information about an individual, their relationships with others, the products they own and the businesses they interact with. This allows scammers to create credible, convincing stories and interactions that instill confidence or fear, causing people to give out sensitive personal information, credit card information or other financial details. Some of these schemes are so involved that they span days or weeks and result in individuals wiring significant amounts of money to these villains. Other plots are based on ransomware that extorts money in exchange for the release of locked up digital information.

See also: Most Firms Still Lack a Cyber Strategy  

The result of this barrage of attacks – especially against individuals – is that many people are just shutting down. You’ve probably seen the advice in recent articles that you should hang up immediately when the caller is not recognized, because criminals are now enticing the person to say “yes,” recording their voice, then using that recording as consent to conduct illegal financial transactions. In addition, phishing scams are becoming more and more realistic, so it is not as easy as it once was to spot a fake request. SMS texting-based scams are on the rise, so individuals are becoming cautious about responding to what they receive via those modes. The bottom line: More and more people are unwilling to take an inbound call, answer an unknown email or communicate with someone on social media who asks for information.

Add to this the fact that millennials are notorious for avoiding actual “live” phone conversations, and you have a serious problem for any company trying to do outbound marketing of any sort. Sure, the direct mail will still fill up the mailbox, but virtually anything communicated electronically is now suspect.

Quite a few people I know (including myself), are taking the strategy that the only time they will buy something, renew a subscription, donate to a charitable cause or provide any personal information is when they initiate the interaction.

This has some serious implications for the insurance industry – both negative and positive. The contact center operations with predictive dialers and other advanced technologies are used extensively by many insurers, especially the Tier 1 companies. And these outbound calls are not just for marketing and prospecting, but also for existing policyholders for insurance-to-value assessments, customer satisfaction surveys and other activities. Emails are also prevalent among insurers for prospecting and for communicating with policyholders and members. Insurers, as well as companies in other industries, may face more and more resistance to these approaches over time.

If there is any silver lining in this, it comes from the enormous societal need for advice on preventing and dodging these scams and for indemnification against these types of attacks. Insurers have the opportunity, and perhaps the obligation, to determine the industry role in this area. Cyber liability coverage could be expanded significantly across all lines of business. Loss-control engineering should increasingly include expertise in these areas to help customers. Insurers should promote legislation, encourage technology solutions and find other ways to thwart this increasing threat.

See also: Cyber Insurance: Coming of Age in ’17?  

It may sound like hyperbole to say that direct marketing is headed for a crash, but preemptive actions by insurers, other industries and governments need to kick into overdrive if this problem is to be solved ... not just for the sake of marketing but for the protection of the customer, as well.

Just a decade ago, “insurance” and “innovation” seemed mutually exclusive. Insurance products and the business overall hadn’t changed much over the previous century and the likelihood of insurers – which, by their very nature, are risk-averse – changing anytime soon seemed unlikely to many both inside and outside the industry. However, over the past decade, there have been dramatic changes in the world that insurers cover and in the data and technology available to them. The result is that insurance companies have opportunities to explore new revenue models and improve profitability in ways that did not exist even just a few years ago. See also: Secret to Finding Top Technology Talent   The most prominent changes and their effects on revenue models include: 1. Consumers, social media, and data – The ability to connect, communicate with and observe insureds and potential insureds in real time or near real time has opened up new possibilities for insurers to understand their customers’ needs, pain points and desires. Many carriers have started to rethink their customer experience so they can “listen” directly to their customers instead of being solely reliant on their distribution channels.

• Revenue model implications –Insurers are using technology and data tools to explore opportunities to provide complementary products and services to insureds. These tools enhance carriers' understanding of customer needs and enable them to address these needs seamlessly via direct and indirect channels.
• Profitability implications – Insurers are rethinking their business processes and customer journeys to identify “leakage areas” and “moments of truth” when profits are hurt by 1) frustrated customers choosing to leave or 2) missed opportunities to expose customers to products and services that meet their needs.

2. Insurtech – While the fintech boom has subsided somewhat elsewhere in financial services, insurtech is still growing. Traditionally, one of the biggest hindrances to many insurers in getting new products or new product enhancements to market was their own technology and data environment, and the belief that they alone had to build any new technology from scratch. However, the rapid rate of technological change and insurtech capabilities has led many carriers to look externally to enhance their capabilities and test new products and delivery models for their products. This underlies the promise that insurtech offers for established players – in fact, we think the opportunities that insurtech presents outweigh the threats many incumbents perceive.

• Revenue model implications – Insurers are increasing their investments in, partnerships with and acquisitions of insurtech companies to more quickly bring new products and services to market, especially ones that better match pricing to a more accurate understanding of the risk or actual use of the insurance (including on-demand and usage-based insurance models).
• Profitability implications – As a result of technological disruption, insurers are rethinking their value-chains and leveraging insurtech and other technology systems to improve operational areas that have historically been inefficient in terms of cost, time and use of human capital.

3. Internet of Things (IoT) – Although IoT technically is part of nsurtech, the impact of device networking is creating unique risk management – even risk avoidance – opportunities for insurers. From commercial and personal line P&C to life/health and group, IoT opens up opportunities for carriers to move from simply computing the probability of risks and then reacting to them as they occur to being able to monitor potential risks and prevent their occurrence.

• Revenue model implications – Insurers are exploring how IoT can open up product and service opportunities. In the P&C space, insurers have the option of partnering with IoT companies to provide IoT solutions as part of their product offering in both B-to-B and B-to C. In life/health and group, we expect insurers to continue to test how devices can reinforce healthy lifestyles and open up opportunities for insurers to make life and health truly about “life and health” and not just death and sickness.
• Profitability implications – Insurers are leveraging IoT to reduce claims frequency and severity. We expect new insurance models will test and explore ways to share these benefits with the customers – for example, by using behavioral economics techniques to provide incentives and reinforce positive decision-making and lifestyle choices.

4. Bionic Advice – There is currently a lot of talk about robots and machines replacing humans. However, at least for now, the real opportunities are not in finding the “perfect algorithms” that completely automate advice. Rather, they’re in machines enhancing the effectiveness of advisers and other distribution channels. And, the insurance industry appears to be prepared; in our recent annual CEO Survey, 61% of insurance CEOs said their companies are exploring the benefits of humans and machines working together. See also: How Technology Breaks Down Silos Numerous studies have confirmed that customers prefer the flexibility of interacting with insurance companies via the channels of their choosing – and this still often includes human ones. The real benefit of robo-advisers and AI is that they can automate basic advice but provide immediate, detailed information specific to a given customer that an adviser then can use to inform her product and planning suggestions. In addition, robotics and AI increasingly provide insurers the opportunity to capture information and refine their understanding of and recommendations for their customers throughout the sales and customer lifecycle processes.

• Revenue model implications –Insurers are exploring bionic advice models to increase revenue by better matching products and customer needs and by creating new product bundles based on an enhanced understanding of customer segments.
• Profitability implications – Insurers have lost out on many sales opportunities over the years – not because they had disinterested customers but because they or the channel partner never really understood customer needs. Many carriers realize this and are exploring how to deploy bionic advice models to automate customer follow-up, either in real time (e.g., while talking to an adviser) or at specific intervals (e.g., annual review, life event, etc.). The goal is to help carriers be more relevant to customers and, by offering appropriate products and service bundles, increase the products per household and boost “stickiness.”

Implications In the case of the scenarios we describe here and others that could emerge, we see some consistent patterns:

• New revenue models will result from the opportunity to leverage data, technology, social medial platforms and mobile devices that lead to the creation of new products, services and pricing strategies.
• Insurtech is not just about new products and services. Insurance companies will continue to take advantage of emerging technologies and data to enhance their internal operating models. This, in turn, will enable them to market new products and services faster and to sell and service them more efficiently.
• Insurance companies will continue to explore how to leverage peer-to-peer models and behavioral economics to drive new pricing strategies, growth and profitability.

PwC predicts that the sharing economy will grow from a $15 billion-a-year industry in 2014 to more than $300 billion in 2025. Now that's growth! Although the term “sharing economy” can be elusive, the common denominator is an on-demand workforce that leverages underused assets. That on-demand workforce is made up of freelancers, gig workers, temporary staff, moonlighters or whatever label you want to prescribe. This is leading to a world of reduced costs for both consumers and businesses. So, can this translate into more affordable insurance products? Let's explore. The Sharing Economy: A Brief Introduction The key to the shift in consumption behavior from ownership to access (or what we've termed the “sharing economy”) is the use of mobile technology. Smartphones and mobile platforms have enabled major sharing platforms such as Uber, Lyft, Airbnb and WeGoLook. (Yes, we know that early agrarian communities shared everything — including labor and food. But they didn't have smartphones!) The sharing economy also includes services — especially those that can be delivered electronically. See also: The Sharing Economy and Accountability   How Businesses Can Take Advantage Individuals benefit from the sharing economy because of the ability to connect goods and services to consumers electronically or, ultimately, in person. A peer-to-peer model of consumption reduces consumer costs. Adding mobile technology facilitates the sharing and has allowed for cost savings across the board. The sharing economy allows individuals to go into business by using the internet, a laptop, tablet or smartphone. Businesses benefit as much as individuals because they can connect, and contract, with members of the on-demand workforce for ad hoc projects or temporary services. And businesses are noticing. According to a Jobshop survey, one-third of businesses plan to use workers from the sharing economy for their staffing needs over the next five years. But what does that mean for insurance? How the Sharing Economy Can Help Promote Affordable Insurance Look at property and casualty insurance, where rates continue to increase year over year: The sharing economy can have a significant effect on payroll and service-delivery costs. National insurance carriers have massive payrolls that drive up rates for consumers. When payroll costs are compared for W-2 employees and on-demand freelance workers, the savings is significant. When a full-time employee is hired at $20 an hour, the actual cost to the company is much more than the hourly wage because of payroll taxes, benefits, workers' compensation premiums and unemployment insurance. Not to mention the cost of the workspace needed for each employee. The W-2 employee who is hired at $20 an hour actually costs the employer about $25.60 an hour, so an independent contractor hired at $20 an hour reduces the cost of payroll by $5.60 an hour, or more than 20%. Contractors can also be hired as needed, so they aren't paid full-time. Multiplying the payroll reductions by the many thousands of independent contractors working nationally, and huge savings are created that can be passed on to the consumer. By accessing the on-demand workforce, insurance carriers can gain access to highly skilled independent contractors (many of them retirees) at minimal cost. These professionals typically work as independent contractors and offer their skills at below-market prices because they have a retirement plan. I would know. WeGoLook employs more than 30,000 of these highly skilled on-demand workers. Areas for Insurers to Target Insurers seeking to reduce payroll costs can easily access various web platforms, such as WeGoLook, to search for independent contractors to satisfy their needs and save money. These needs can include:

• Communications: Experienced communicators can be contracted to connect with clients and agents to discuss coming programs or to conduct surveys.
• Asset Verification: Most property and casualty insurers rely on inspections of residential and commercial properties to make certain the dwelling or building qualifies structurally for a policy. Insurers can use gig platforms to contract skilled field service agents to personally visit and photograph the property in question.
• Claims: An insurer’s claim department relies on experienced adjusters to inspect and adjust damage to a property or vehicle. In areas with lower populations, using independent contractors makes better financial sense than hiring full-time claims adjusters.

See also: Sharing Economy: The Concept of Trust   Make Insurance Affordable by Passing on Savings to Consumers It’s highly likely that national insurers can reduce payroll costs and service delivery by partnering with on-demand workers in the sharing economy. Technology makes it possible for the parties to connect, discuss and contract for whatever the project might be. The savings can be passed on to consumers, making you more competitive in a crowded market.

The insurance industry is one of the oldest and most straightforward businesses in the world. It’s a numbers game. Risk gets calculated, quantified and priced. If the odds work out, the house always wins. Anything is insurable as long as it’s measurable. In the insurance world, MGAs (managing general agents) partner with carriers to manage programs, working with brokers or offering insurance directly to the customer. The majority of carriers and MGAs have been rather slow to spot opportunities to significantly improve the insurance lifecycle (rate, apply, bind, manage and renew), which is leaving room for competitors to move in. In fact, the insurance startup Lemonade just made news for using AI to pay a claim in three seconds. That is not a typo -- Lemonade took as long to pay a claim as it took you to read this sentence. If you’re reading this, thinking, “well that’s renters; my programs are different” -- it’s time to wake up. This disruption is real. And it’s happening right now. MGAs have a unique role in the insurance life cycle, and they will either innovate and evolve or be eliminated from the food chain. To stay relevant, they will need to assess their strategy, place technology at the heart, improve the customer experience and remove inefficiency. Large-Premium, Low-Volume MGA Programs For MGAs that do high-dollar, low-volume sales through brokers, technology should be deployed to make the entire process more efficient, less time-consuming and easier for their brokers and customers. Whereas a typical lifecycle interaction like an insurance application or a claim processing may take days or weeks with hours of human time involved, with technology it doesn’t. MGAs of the future must create the fastest, most convenient experience for brokers to differentiate themselves and succeed in this new insurance economy. MGAs should identify and prioritize the areas in their lifecycle that cause the most friction between them and the broker and apply technology to improve the experience. See also: MGAs 4.0: The Role Evolves Yet Again   As an example, if the turnaround time for rating policies is causing friction for your brokers, begin introducing cognitive AI to automatically rate a portion (e.g., 60%) of submitted policies. Then, over time, increase this percentage until your firm is able to rate all policies instantaneously with technology. Ultimately, this will mean lower costs and more efficiency, which bodes well for consumers and sellers. This also means that customers will come to expect this level of service--they will no longer be willing to wait days or weeks for processes that your competitor can perform on the spot. MGAs that fail to improve their processes and embrace technology will lose customers to those that do. Here are the top 5 signs it’s time to wake up: --Requests for quotes are submitted to your underwriters as PDFs --Providing quotes and feedback takes more than an hour --Policy issuance is manually generated --Policy management or renewals are handled manually --You are not applying cognitive analysis to your policyholder and claim data If this sounds like your firm, then the time to act is now. Seek out digital solutions to these problems. Invest in technology before it’s too late. Small-Premium, High-Volume MGA Programs Much of the bulk and overhead of the insurance process comes from the layers and steps involved. For lower-premium, high-volume programs, the only way forward is to automate your program and either offer it directly to consumers or provide brokers with the keys. Great insurance experiences are no longer limited to major lines. As technology eases the entire process of selling, quoting and binding, there’s no need for a legion of brokers and agents to do the leg work. People can just sign up online in minutes and manage their policy directly through a web portal. In fact, 67% of millennials buy popular policies (auto, renters, etc) online, and this trend will permeate and grow into niche programs. Great agencies have always differentiated themselves on service. In the modern insurance economy, technology will usher in the next level of service that customers already expect. MGAs will cut the middlemen out of the equation and build branded, digital products to offer niche programs directly to consumers, controlling the entire experience to deliver a higher quality of service. Additionally, MGAs that position their platforms to integrate with wholesale channels or online commerce will see dramatic growth. Great agencies have always differentiated themselves on service. In the modern insurance economy, technology will usher in the next level of service that customers already expect. This all means better service, lower costs (read: better margins) and higher renewal rates. Here are the top 5 signs it’s time to wake up: --Customers cannot get an instant quote on all devices --Policy issuance, management or renewal is manual --Payment is not automated --Your program brand is not a digital product --Applications can be submitted with incomplete or inaccurate information If your firm deals in low-cost, high-volume policies and is seeing these signs, then it’s time to start thinking about the innovation happening around you--building a competitive advantage through technology. Bottom Line for MGAs Regardless of the size or type of your program, technical innovation and advancement is your responsibility. While carriers may provide portals, platforms or tools, it’s critically important to continually evaluate each of your customer, employee and broker touch points. See also: M&A: the Outlook for Insurers   MGAs are in a unique situation right now. They’re at the precipice of an emerging wave of digital tools that will disrupt much of their business--from quote to renewal. Those that succeed will be the ones that paddle toward the wave of change and adjust their business to use technology to better serve employees, clients and customers. The question is: Will your business see the wave?

Valentino Rossi (a.k.a the living legend of MotoGP) is 37 years old (a lifetime in motorsport years), is first in all-time 500cc (MotoGP) race wins standings with 88 victories and is second in all time overall wins standings with 114 race wins (just behind Giacomo Agostini, with 122.) But it’s not just Rossi’s stats, victories, poles, podiums or championship wins that lure the crowds to rally behind him no matter which team he’s on.

Watching riders close up in action is like seeing someone ride a 241 km/h rocket — with riders disappearing over the sides of their bikes, one knee grazing the tarmac, and riders leaning over at angles that seem to defy the laws of physics. A very obviously skillful, fast-moving spectacle with crashes and passing galore, it is more gladiatorial than car racing.

Rossi’s fans are the maddest of all. Every year, hundreds of motorsport fans have pictures of Rossi tattooed on their backs, while others have Rossi’s number, 46, tattooed on their chests. At the Italian GP, hillsides are covered in yellow, Rossi’s color. In Germany, fans turn up on medical drips in homage to the “Doctor,” as Rossi is known.

See also: Does Your Culture Embrace Innovation?   We can easily identify the Rossis in our workplaces. They are the folks who take responsibility, the connectors, the ones with insight, those who are fair and never lose hope even when the chips are down. The leaders, the innovators, the promise-makers and the supporters. Those who do more than they are asked, care, speak the truth, change things for the better and inspire others. It is the personality and energy that is unique to the individual that makes all the difference. It is the skills that really matter — the human skills that indicate a high level of emotional intelligence (EQ) that make things happen, propel projects forward, create and sustain partnerships and facilitate collaboration. Without these skills, we’d all be rendered bots. Yet we persist, hiring and promoting based on easily defined skills that can be measured like the stats in motorsport. We can all agree that a rider needs to know how to ride, a designer must know how to design, and an underwriter must know how to assess risks. But when an employee demoralizes the entire team, undermining a project, or a bully causes future stars to quit the organization, we practically need an act of Parliament to get rid of him (even though that person is stealing from us!). We know how to measure productivity, but we have trouble measuring commitment and passion. Would we rather be powerful bystanders? Is the professional expertise all that matters? How, then, do we explain the different outcomes achieved by similarly skilled professionals? Rossi’s dominance in motorcycle racing, along with his philosophy that generating excitement is more important than winning, has given his sport mainstream appeal and has made him a superstar worshipped as a living legend by countless adoring fans. Rossi’s energy, style and panache draws crowds from around the world. He has made motorcycle racing fun, interesting and meaningful. See also: Building a Strong Insurance Risk Culture   We only have to look at any thriving organization and we’ll find what differentiates it from the organizations that are struggling is the difficult-to-measure attitudes, personalities, processes and perceptions of the people who do the work. Culture defeats strategy outright!

Dear Majority Leader McCarthy, I offer the following comments and recommendations in response to your letter dated Dec. 2, 2016, as the House of Representatives moves forward with the repeal of the Affordable Care Act and offers meaningful healthcare policy suggestions that place the best interests of the consumer and the market ahead of continued government marketplace meddling. As the Oklahoma Insurance Department surveys the private individual health insurance market in Oklahoma, it is apparent that consumers, insurers and providers are in a combined state of distress. We see the expected marketplace failings, because of government intervention, of limited competition and consumer choice in both benefit plans and provider networks that have led to ever-increasing premium costs. Consumer confusion and dissatisfaction is prevalent and is shared by other marketplace stakeholders. It is time we start thinking differently and move toward more innovative solutions that are working in other countries. We don’t know what health insurance is going to look like in 10, 15 or 30 years. We have to start putting the processes in place at the state level to allow for real innovation in this sector, one that has been totally hampered by government intervention for decades. To that end, one thing that has recently come to our attention that we think would be of interest to everyone is contained in the attached memo [at the bottom of this article] from Dr. David M. Dror, chairman of the Micro Insurance Academy and executive chairman at Social Re Consulting (pvt) Ltd. The memo focuses specifically on “health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa.” This memo is an example of innovative thinking that we need to consider for certain microsegments of the population in the U.S. We need to look for new solutions similar to microinsurance that have yet to be considered in the U.S. but that are working in other countries. The current landscape presents us with a real opportunity to examine the principles on which we want to base our health insurance markets. For far too long, health insurance has drifted away from traditional insurance concepts (like fortuity) and has turned into a cost-sharing program instead. It is no wonder that health insurance premiums are spiraling out of control when every health insurance policy is required to pay for a very costly menu of benefits without regard to preexisting conditions. Health insurers should be allowed to underwrite for fortuitous risk and should not be forced to assume known chronic claims. Imagine how much we would pay for auto insurance if the policy was required to pay for all damage occurring over the life of the vehicle and even before the coverage was effective. We have in front of us now a chance to reject this creeping sentiment that health insurance is an entitlement rather than an insurance product. For the nearly 300,000 eligible Oklahomans who look to the individual market for coverage — including many of the citizens of tribal governments — Congress must take action that (a) stabilizes the marketplace for policy year 2018; (b) returns to the states the flexibility to self-determine the scope and depth of insurance coverages that best serve the citizens; and (c) restores the regulatory authority to state insurance departments that protects consumer interests and enables issuers to deliver value-based, affordable policies that best serve their constituents.  See also: Obamacare: Where Do We Stand Today?   A free market, grounded in fair and limited regulatory oversight — which is predicated on constitutional freedoms and rights — presents the best possibility of delivering sustainable access and affordability in this marketplace going forward. As we move forward, a properly designed policy must target improvement of health outcomes along with control of healthcare costs, reduction of administrative and regulatory burdens and advanced system sustainability. Marketplace Stabilization Vice President Mike Pence and Speaker of the House Paul Ryan recently discussed their intentions to have a “smooth transition” to stabilize the health market. Their approach will marry the White House’s planned executive orders with legislative approaches to stabilize the market as our country begins to repeal and/or replace the disastrous ACA. This approach, formulated and led by Congress and the White House, will be difficult. The states stand ready to do their part to ensure the transition is as smooth as possible. Promises by the federal government under the Democrats' control have placed this country on a very dangerous path that will take time to unwind through a budget-neutral approach. Saddling this burden on the citizens without the funds to back it up is reckless and irresponsible. There would be no more significant signal by Congress and the new administration of their intent to stabilize markets than to fulfill the payment obligations made by the federal government under the ACA Risk Corridor program utilizing any existing money to avoid deficit spending. These promised safety valve payments are not bail-outs of insolvent companies but rather the fulfillment of a promise previously made to insurers. Further stabilization initiatives for carrier participation in policy year 2018 and beyond would include an immediate fix of the Special Enrollment Period (SEP) eligibility problem using robust verification and documentation criteria and waiting periods for market re-entry; repealing ACA fees (PCORI, HIT and FFM issuer fees) that will reduce consumer premiums; and providing a clear decision on how Advanced Premium Tax Credits (APTC) and the Cost Sharing Reduction (CSR) programs will be administered under a replacement program. These initiatives will mitigate market instability and future issuer exits. Moving Forward Initiatives: My colleagues on the regulatory and state government side will be enumerating multiple initiatives that have been identified as important components of a replacement package. The following list represents concepts and changes I believe are essential to the repair/replace effort that Congress will undertake:

• Permit sale of insurance across state lines under state regulatory enforcement.
• Adopt policies that expand the use of health savings accounts coupled with more affordable high-deductible health plans.
• Repeal the federal individual and small-employer coverage mandates. Consider a meaningful continuous coverage premium discount or a surcharge and waiting period for interrupted coverage.
• Allow states to pursue innovative healthcare delivery mechanisms including, telemedicine and the expansion of the technologically based Project ECHO for rural America.
• Support transparency in pricing for medical delivery like the Surgery Center of Oklahoma has done by posting prices for elective procedures on its website.
• A federally supported but state-administered combination reinsurance and high-risk pool program that addresses the risk management challenges of high-risk enrollees.
• Permit employers to extend transitional “grandmother” group plans beyond the planned 2017 expiration as changes to the individual market are implemented.
• Cap monetary damages that can be awarded in medical malpractice lawsuits.
• Repeal rules on short-term health plans that limit policy duration.
• Replace the 90-day premium grace period with state-based grace periods.
• Eliminate the dual regulatory scheme currently existing at the federal and state levels. Return all regulatory authority to the states.
• Provide flexibility through state-based innovative pathways using 1115 and 1332 waivers to create affordable health insurance coverages for the uninsured.
• Implement market-based deadlines for submission of insurance rates and forms
• Establish a federal initiative to sunset fee-for-service reimbursement and make the transition to value-based reimbursement payments.
• Allow states to enact new health reforms at the grade-school level that incorporate physical fitness and nutrition programs to deter preventable illnesses.
• Let states determine the age at which a child can remain on his or her parent’s group health plan.
• Enact legislation that protects consumers from unfair balance billing and surprise billing.
• Provide federal support to accelerate the interoperability of electronic health records (EHR).
• Reform FAA rules to give states authority to regulate air ambulances.
• Acknowledge the existence of and promote the protections surrounding religious-based medical-sharing networks similar to companies like Medi-Share, where premiums are significantly more affordable in exchange for limited network access.

See also: Is the ACA Repeal Taking Shape?   I appreciate the opportunity to provide my thoughts on moving forward and advancing meaningful healthcare public policy. As an experienced regulator and conservative leader, I understand the challenges of balancing budgets and managing deficits. I urge the House to deliver immediate changes that will stabilize the individual market for policy year 2018 and to design long-term solutions that address competition and affordability to participants in the individual market. The following is a briefing note from Social Re Consultancy for Mr. John D. Doak, Oklahoma insurance commissioner, on health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa. 

The insurance industry is in transition — there's no doubt about it. So much is happening regarding digital strategies, insurtech, customer expectations, analytics and other areas that are positioning the industry for the future. Despite all the activity, IT budgets for P&C and L&A insurers in North America this year appear to be subdued, with average increases of only 2.7%, following larger increases over the past few years.

There are a couple explanations for this seeming contradiction. For one, business conditions in the industry are less favorable than they have been in recent years, prompting predictions of slower growth for key lines. This results in budgets for the existing tech infrastructure that hold the line. It should also be noted that the percentage of insurers planning decreases has jumped to 15%, which factors into the average and reinforces the notion that there is an industry bifurcation occurring, with a widening gap between the winners and losers.

A key trend identified in our recent research report, “2017 Insurance Technology Spending Priorities and Plans,” is that many projects are shifting from new or replacement initiatives to enhancing systems already in place. There are still plenty of new deals out there and big modernization or replacement projects underway in specific areas (such as commercial lines policy systems). But the big picture seems to be that the gains from many projects in prior years are being optimized and extended as insurers look to solidify their tech infrastructure and prepare for new initiatives.

See also: Innovation — or Just Innovative Thinking?  

But there is another side to the story.

Many of the newer tech initiatives are being driven and funded by business units or at the corporate level. This is not a brand-new trend, but the more that tech strategy becomes intertwined with business strategy, the more often that business executives are the catalysts and sponsors. Chief marketing officers are driving change in digital and customer experience. Newly established chief digital officers are key players at many companies now. Strategists and business unit heads are seeking advantages from analytics, emerging technologies and insurtech. Senior corporate leaders are creating ventures and are asking how the digital connected world changes their customers and the insurance industry.

Insurers expect IT budgets to pick up again starting in 2018. In the meantime, the strategy work that is underway below the surface at many companies is likely to result in increases for tech-based initiatives related to new areas. Major investments and plans for distribution channels, underwriting, core systems and other areas are not going away. In fact, they are vital to maintaining modern systems in these mission-critical areas.

Overall, 2017 will be a pivotal year for the industry — a year of transition. Expect to see investments increase in initiatives aimed at innovation and transformation as the pace picks up and the industry carves out new roles in the digital, connected world.

Customer-centricity and mobile engagement: the next wave of innovation to disrupt the insurance industry?   The individual customer has to be at the center of the marketing strategy of every company that wants to succeed. A customer-centric marketing approach starts with the realization that there is no “average” customer. Customers have different behaviors and preferences — and this presents rich opportunities to move past a “one-size-fits-all” marketing approach. Customer-centric marketing teams think of their customer base as their greatest long-term investment. A customer-centric approach means targeting the right customer through the right channel and sending the right message — at the right time. It also helps teams align around a strategy that will drive long-term value to the business, acquiring high-value customers and keeping them coming back. The consumption habits have deeply changed in a competitive environment where the customers face information overload. The smartphone has become the primary reference when searching for information, comparing products, finding the best deals and connecting with a brand/organization. The smartphone has become the first screen, the reference for our daily activities. “Mobile is the future.” With these very words in 2010, Eric Schmidt, the then-CEO of Google and now chairman of Alphabet, gave us a glimpse of what was going to happen. And he hit the target! As citizens and customers, we live surrounded by dozens of different devices, and the screen of the smartphone has become the main reference for all our activities. Mobile is not just another channel, it is a proxy of the customer — an entirely new lifestyle. The awareness that the rhythm of our existence is marked by the mobile revolution is certified by three common stats: 15: The minutes between when we wake up and when we turn on our smartphones. 150: How many times we check, on average, our smartphones during the day. 177: The minutes we spend, on average, every day looking at the screen of our mobile devices. Customers today do not go online. They live online. Better yet, they experience an endless sequence of moments — in a nonlinear balance between the online and offline worlds. See also: Top 10 Insurtech Trends for 2017   Your customers are ready to buy. They are ready to buy from you. They are just asking for one simple thing: that they can receive relevant information on their smartphone when it is the right time. According to Google research on “micro-moments” that offer memorable experiences to customers, a retail brand must develop and cultivate three qualities: Be There: The ability to show up when and where the customer has a need or desire. Be Useful: The ability to be there with relevant content and to become a primary reference. Be Quick: The ability to think and act fast. Speed is essential across all stages of the customer journey. At the core, the brand-new customer is driven by technology. The super-shoppers are tech-savvy, and you cannot even remotely think to engage and monetize them as you did with the clients in past decades. If you do not speak the new shoppers' language, you will never capture their attention, and, ultimately, you will lose all relevance. What does it mean to be relevant in the mobile age? Easy. Rethink the marketing strategy, how to connect with customers (online and in-store) and how to convey contents and values. In a few words, you must use technology to establish your brand as a trustworthy source of information and inspiration. And you must do it not once and for all, but improving day after day after day. Study and understand the super-shopper; be present in the micro moments that matter; stay relevant; and be epic. Only then you will conquer shoppers' hearts and minds. Shopping in the era of micro moments often starts when people have a need or desire to purchase a product. Once they feel this need, they start looking for ideas, a search that will lead them to online communities, social networks, video tutorials and company blogs. Only then will they evaluate the different options and eventually decide what (and where) to buy. In these moments, you have to be there and be useful to win trust and loyalty. “Be there” means you must identify the most important micro moments and commit to being there, whenever and wherever a shopper is searching, especially on mobile. “Be useful” means you must provide valuable contents when your customers need them, on any channel — social media, point of sale, advertising, blog, social commerce, etc. “Be quick” means you must provide the required and valuable information at the right time and in the right manner. Has the moment come for an old-style industry like insurance to turn the page? Several experts, managers, entrepreneurs and investors engaged in the insurance space consider that 2017 will be the year of insurtech. Some strongly believe that every successful insurance company will be insurtech soon! An intelligent use of the technology in this industry can generate opportunities to close the protection gap, reduce the anti-selection issue, optimize loss ratio with personalized proposals and reduce overall processing cost. All this in a customer-centric approach. The Internet of Things and artificial intelligence are undoubtedly two main drivers of the evolution in the industry, and we have seen several interesting applications already on the market. A lot of insurtech startups are investing all around the world in these technologies, which enable insurance carriers to propose innovative and customized coverage to their customers while  “blue ocean” opportunities are appearing. See also: 10 Predictions for Insurtech in 2017   Traditionally, the insurance industry business model is focused on:

• Identifying the pool of customers that might have risks assessed;
• Targeting those customers and assessing the risk for each class;
• Selling differently priced policies and spreading the risks over the pool of customers; and
• Trying to retain those customers as long as possible, offering lower price for longer contracts.

This approach is, by definition, based on the concept of “standardization” — the opposite of “customized” from a marketing point of view — and, even if it was one of the golden rules of the insurance business for several decades, it has become obsolete nowadays. The insurance industry has always been data-rich, but, traditionally , it is quite unstructured, or, at least, the models used are quite old and simple. Being connected has become the talk of the town, and insurance companies are one of the main interested parties in this discussion — some of them even being actual promoters of change and innovation. Consumers are becoming more and more connected, whether it is at home, at work, behind the wheel, when they engage in sports or leisure activities and so on. The surrounding environment is becoming smart and is being incorporated in the connected ecosystem, thus creating opportunities for insurance companies — opportunities that must be managed appropriately to maximize value. Here, big data analytics play a huge role, as the quantity of collected data and variables is getting higher and higher. The IoT real-time data collection and sharing power will create significant opportunities in finer product segmentation and more specialized pools of risk and predictive modeling to better assess risk, as well as improving loss control and accelerating premium growth. The IoT is the network or system of related computing devices and sensors, and it can communicate with other devices on the network. These objects, or “things,” are capable of transmitting data. In the end, for insurance carriers to harness the power of the IoT, each will have to first think creatively about what data to gather and how to use it. A system based on IoT and big data analytics can identify patterns and provide optimized solutions based on real-time input. Up-front: A seamless user-friendly interface can transform the way companies communicate with policy holders. The IoT’s impact within insurance is coming fully into focus. At the highest level, better use of IoT and sensor data means insurers have the opportunity to:

• Establish direct, unmediated customer relationships;
• Gain more granular and precise understanding of who their customers are and how their needs change over time; and
• Individualize offerings of products and features.

Within IoT applications, artificial intelligence is also helping (or disrupting, depending on how you see the matter) the sector in different ways. The abundance of data can be used to refine customer segmentation and provide personalized offers based on personal features. Artificial intelligence offers predictive recommendations that are backed by complex algorithms and data and have the ability to analyze process flows for bottlenecks, improving overall company and customer satisfaction. Algorithms compare answers and information provided by customers to make appropriate recommendations for each risk scenario. The algorithms are constantly at work to better understand humans and their thought processes through machine learning, which allows AI to analyze human behavior and provide predictive consulting based on each individual’s wants and needs. So, AI can help increase customer engagement and retention with personalized offers delivered at the right time, in the right way, at the right price.

Mergers and acquisitions in the insurance sector continued to be very active in 2016 on the heels of record activity in 2015. There were 482 announced transactions in the sector for a total disclosed deal value of $25.5 billion. Deal activity was driven by Asian buyers eager to diversify and enter the U.S. market, by divestitures and by insurance companies looking to expand into technology, asset management and ancillary businesses. We expect the strong M&A interest to continue, driven primarily by inbound investment. With the election of a new president and the transition of power in January 2017 comes tax and regulatory uncertainty, which may temporarily decelerate the pace of deal activity. President Trump is expected to prioritize the repeal and replacement of Obamacare, tax reform and changes to U.S. trade policy, all of which have unique and potentially significant impact on the insurance sector. Further, the latest Chinese inbound deals have drawn regulatory scrutiny, with skepticism from the stock market regarding their ability to obtain regulatory approval. Bond yields have spiked over the last few months and are widely expected to continue to increase. The increase in yields should improve insurance company earnings, which is likely to encourage sales of legacy and closed blocks. Highlights of 2016 deal activity Insurance activity remains high Insurance deal activity has steadily increased since the financial crisis, reaching records in 2015 both in terms of deal volume and announced deal value. While M&A declined in 2016, activity remained high, with announced deals and deal values exceeding the levels seen in 2014. In 2015, deal value was driven by the Ace-Chubb merger, valued at $29.4 billion, which accounted for 41% of deal value. See also: A Closer Look at the Future of Insurance   Significant transactions Key themes in 2016 include:

• Continued consolidation of Bermuda insurers, with the acquisitions of Allied World, Endurance and Ironshore. Drivers of consolidation include the difficult growth and premium environment.
• Interest by Asian insurers in continuing to expand their U.S. footprint -- accounting for two of the top-10 transactions.
• Expansion in specialty lines of business as core businesses have become more competitive. This is evidenced by (i) Arch’s acquisition of mortgage insurer United Guaranty as a third major business after P&C reinsurance and P&C insurance; (ii) Allstate’s acquisition of consumer electronics and appliance protection plan provider SquareTrade to build out its consumer-focused strategy; and (iii) the agreement by National Indemnity (subsidiary of Berkshire Hathaway) to acquire the largest New York medical professional liability provider, Medical Liability Mutual Insurance, a deal expected to close in 2017.
• More activity in insurance brokerage, which accounts for two of the top-10 deals.
• Focus on scaling up to generate synergies, as evidenced by the acquisitions done by Assured Guaranty and National General Holdings.
• Continued growth in asset management capabilities, as exemplified by New York Life Investment Management's expanding its alternative offerings by announcing a majority stake in Credit Value Partners LP in January 2017 and MassMutual's acquiring ACRE Capital Holdings, a specialty finance company engaged in mortgage banking.

Key trends and insights Sub-sectors highlights Life & Annuity – The sector has been affected by factors such as Asian buyers diversifying their revenue base, regulations such as the fiduciary rule by the Department of Labor and the SIFI designation, divestitures and disposing of underperforming legacy blocks, specifically variable annuity and long term care businesses. P&C – The sector has been experiencing a challenging pricing cycle, which has driven insurers to 1) focus on specialty lines and specialized niche areas for growth and 2) consolidate. We have seen large insurance carriers enter the specialty space. Furthermore, with an abundance of capacity and capital, the dynamics of the reinsurance market have changed. Reinsurers are trying to adjust to the new reality by turning to M&A and innovation in products and markets. Insurance Brokers – The insurance brokerage space has seen a wave of consolidation given the current low-interest-rate environment, which translates into cheap debt. The next consolidation wave is likely in managing general agents, as they are built on flexible and innovative foundations that set them apart from traditional underwriting businesses. See also: Key Findings on the Insurance Industry   Insurtech has grown exponentially since 2011. According to PwC’s 2016 Global FinTech Survey, 21% of insurance business is at risk of being lost to standalone fintech companies within five years. As such, insurers have set up their own venture capital arms, typically investing at the seed stage, in efforts to keep up with the pace of technology and innovation and find ways to enhance their core business. Investments by insurers and their corporate venture arms are on pace to rise nearly 20x from 2013 to 2016 at the current run rate. Conclusion and outlook The insurance industry will be affected by the proposed policies of the Trump administration, especially on tax and regulatory issues. Increasing bond yields and the Fed’s latest signal about a quick pace of rate increases in 2017 are expected to improve portfolio income for insurers.

• Macroeconomic environment: U.S. equity markets have been rallying since the election, with optimism supported by President Trump’s policies to boost growth and relieve regulatory pressures. However, the rally may be short-lived if policies fail to meet investor expectations. While the Fed is widely expected to raise rates in 2017, other central banks around the world are easing, and uncertainty in Europe has spread, with the possibility that countries will leave the euro zone or the currency union will break apart.

• Regulatory environment: The direction of regulatory and tax policy is likely to change materially, as the president has campaigned for deregulation and reducing taxes. Uncertainty around the DOL fiduciary rule has been mounting even though President Trump has not spoken out on the rule; some of his advisers have said they intend to roll it back. His proposed changes to Obamacare will affect life insurers, but at this juncture it is hard to estimate the extent of the impact given the lack of specifics shared by the new administration.

• Sale of legacy blocks: Continued focus on exiting legacy risks such as A&E, long-term care and VA by way of sale or reinsurance. In 2017, already, there have been two significant announced transactions, AIG paying $10 billion to Berkshire for long-tail liability exposure and Hartford paying National Indemnity $650 million for adverse development cover for A&E losses.

• Expansion of products: Insurers will focus on expanding into niche areas such as cyber insurance (expected to be the fastest-growing insurance product fueled by a slate of recent corporate and government hacking). Further, life insurers are focusing on direct-issue term products.

• Technology: Emerging technologies including automation, robo-advisers, data analysis and blockchain are expected to transform the insurance industry. Incumbents have been responding by direct investment in startups or forming joint ventures to stay competitive and will continue to do so.

• Foreign entrants: Chinese and Japanese insurers have keen interest in expanding due to weak domestic economies, intent to diversify products and risk and hope to expand capabilities.

• Private equity/hedge funds/family offices: Non-traditional firms have a strong interest in expanding beyond the brokers and annuities business to include other sectors within insurance, such as MGAs.

Toward the end of my days as a reporter at the Wall Street Journal, some friends started calling me Dr. Death, because everything I covered seemed to shrivel up. IBM was the most important company in the world when I started writing about it in 1986 and was having a near-death experience by the time I moved off the beat in 1993. Mexico was the darling of the developing world when I moved there in 1993 but pretty much fell apart in 1995 following a devaluation of the currency. When I moved to Silicon Valley in 1996, an acquaintance who worked in PR at Intel called me and said, "I will pay you money to not cover my company." I did, in fact, get assigned to the semiconductor industry, which went into a two-year recession. 

Now, I'm not trying to scare anybody. I've been involved with ITL for almost 3 1/2 years now, and so far, so good. The insurance industry's potential seems to me to be boundless. But my time as Dr. Death convinced me that we don't focus enough on the possibility of failure. That conviction led to my book with Chunka Mui, "Billion Dollar Lesssons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years," for which we had 20 researchers spend two years looking at 2,500 failures. That conviction has led to quite a bit of work since then, too, on failures and to the belief that, as we look at the bounty of innovation appearing in insurtech, we need to keep this in mind: We want to believe that every tree grows to the sky, that every startup will be Uber, but more than 90% of startups fail.

The question is: Which are the 90%, and which are the 10% that will thrive, transforming the industry? The best analysis I've seen on the issue comes from Nick Lamparelli, who has given us "A Simple Model to Assess Insurtechs." We at ITL continue to build out the capabilities of The Innovator's Edge, which not only tracks the more than 850 insurtechs we've identified but which has been gathering the sort of information that providers tell us will help them find those they want to buy from, those they want to form partnerships with and those they may want to acquire. (Side note to insurtechs: If you haven't yet filled out our Market Maturity Review, please contact us at info@insurancethoughtleadership.com; a half-hour spent on the MMR will help you gain visibility within our community.) We'll continue to do our part to help you separate the wheat from the chaff.

For now, I mostly want to remind you that there really is a lot of chaff, so be careful. When I was at a personal computing conference in 1987 and retired to the bar—where the real work was done—I sat next to a guy who told me about his tiny startup and a product it called Presenter. I knew immediately he had a winner and wrote about the product in the Journal. You know the product as PowerPoint. But it's usually a lot harder to know who the winners will be.