There’s a lot in print and on the web about the concept of “engagement” and how it applies in the insurance and financial services sales process. We all know what engagement means at an everyday level as we work to connect with people in various ways or describe how someone is engaged or even engaging. It's exciting when we hear of a couple becoming “engaged." In business, the word "engagement" has many applications, ranging from simply having an agreed upon appointment time (an engagement)… to reaching a deal, resulting in buying or contracting for some service. When it comes to sales, client or prospect “engagement” needs to be understood much, much more. Engagement is a strategic asset or weapon when a professional intentionally and regularly stays in touch with their clients and centers of influence or trusted partners by connecting personally and relationally. Being highly engaged means the professional is staying focused with all these people in the continuing delivery of value, investing time, staying in touch every two to three weeks and building a deeper personal relationship with each person based on their individual interests and needs. This type of strategic investment always builds trust, keeps the pathways open for serving added needs and finding new opportunities and always gains new prospect referrals and introductions. See also: How Advocates Can Reengage Workers   Research about engagement in the financial services industry brings some startling information to the table. The work by Julie Littlechild of Absolute Engagement of Toronto shows that clients who have a “satisfied” relationship with their provider have an overall loyalty rating of 99%, yet only 20% have actually provided a referral to their financial adviser. So they’re satisfied and are likely going to stay as clients, but only one in five has actually referred a new opportunity to their provider. However, when the survey polled clients who felt their provider was very engaged, the results shift dramatically. These clients had a 100% loyalty rating, and 98% of these had actually already provided referrals to their advisers during the past year. So, do the math: Highly engaged relationships provide more times more referrals than those where there’s less or little engagement. Now imagine you had all of your clients and trusted professional connectors feeling that you were in a real, connected relationship with them. What could that potentially yield to you in the way of new sales opportunities, month in and month out? The national sales leader of one of the largest and most recognized Insurance companies in the world told me that “our competition really comes from inside… it’s the inertia inside of my firm…,” meaning producers keep doing the same things that they’ve always done and then get the same lukewarm results. All of that can be changed with added emphasis on training his teams on the importance and specific ways to create better engagement with clients and centers of influence Today, insurance leaders are universally concerned about technology disruption… you know, the threats coming from startups like Lemonade right now, and Zenefits before. I know that any professional worth his suit can readily withstand these competitors by focusing on using his No. 1 asset: the ability to build highly engaged relationships with clients and other professionals that will increase loyalty and generate a multitude of new referred client opportunities. As a producer, your best asset is your ability to strengthen each and every relationship in your network on a person-to-person basis to where trust is the glue and your personal connection provides the ties that bind. I’ll guarantee that no newcomer or technology can easily replicate what you’re building when you reach out and make a personal contact with the people in your networks every two to three weeks. That provides the inoculation against disruptors -- essential if you’re serious about protecting and growing your business. See also: MyPath: Engage the Next Generation   Imagine how 30 to 35 of these important people would feel if you had a routine that showed them how important you believe they are. Imagine how they would feel if every two weeks or so you were to make an unexpected visit, send an email with something they are caring about, make a quick, unplanned phone call or write a short personal note of appreciation with no other purpose in mind but to make them know that you are thinking about them and that they are valued and important. To build these engaged relationships, you first must develop a mindset of being a “giver.” To make it happen consistently, use tools to keep you scheduled and on track and systematically ensure that you’re staying engaged and in touch to provide meaning and value and create close connections. Then, as Robert Cialdini states in his noted book "Influence," as you give meaningfully to people, they will have a desire to reciprocate, and if you teach them how to give back… with referrals and introductions, they will! Become one of the few getting excellent ratings for engagement in your industry, and you’ll reach every goal you have. Someone once said, “Your network is the key to your net worth.” That statement has never been more appropriate than it is right now! And I’ll add that engagement is the key to building your network!

Love it or hate it, 2016 was a year that brought many surprises. And 2017 is looking like another year of unexpected outcomes. The saying goes, "May you live in interesting times." And we are definitely living in interesting times, including in the insurance industry. Here are 10 insurance questions for 2017: 1. Will this be the year that the U.S. insurance industry makes a definitive move toward level commissions or fee-based products across all product lines? Most other professional service providers are paid on an hourly or fee basis, including accountants, attorneys, physicians, trust officers and the majority of financial planners. The Department of Labor fiduciary rule is driving some insurance companies to offer fee-based annuities for retirement plans rather than traditional commission-based annuities. See my take on this: The Fiduciary Rule: A Call To Arms for the Insurance Bill of Rights: Aligning the Insurance Industry With Consumers. The U.K. already has a commission ban, yet life insurance sales are now trending up. While, there are differences in the U.S. and U.K. markets, the core principles are the same. To learn more, visit the Nerd's Eye View Blog for Bob Veres' in-depth look. Commissions are not necessarily the bottom-line issue; it's the premiums that really make the difference. 2. Will the Affordable Care Act stay in effect?  While no one knows for sure, it is unlikely that the ACA will be completely repealed any time soon. President-elect Trump, along with leaders in Congress, have vowed to repeal and replace, but doing so will be challenging given the lack of votes in the Senate. And while there are significant issues with the ACA, consumers do benefit. Also, healthcare organizations and insurance companies having spent millions of dollars to adjust to it. What is likely is that changes will occur on a gradual basis. The bottom line is that one of the most important benefits to U.S. citizens is the ability to purchase health insurance if you have any existing (or past) health issues. Prior to the ACA, it was challenging to get an individual health insurance policy, which created a bigger issue for individuals and for our overall society. Yes, premiums are increasing, and there are fewer insurers participating. At the same time, it is estimated that there are more than 20 million people with insurance under the ACA. Change will happen, just gradually. If the ACA is replaced, there remains the questions of how to fund it, if the current mandates (taxes and penalties) are stripped out. The funding is one of the core issues and does need to be revised. Insurance companies have also left the federal and state exchanges in a number of states, and they will need to be given incentives to return to the marketplaces. See also: Top 10 Insurtech Trends for 2017   3. What will happen with long-term care insurance (LTCI)? The need for long-term care insurance is not going away; people are living longer, and healthcare costs are rising. Medicaid coverage is minimal and does not apply to most long-term-care expenses. Older LTCI policies have experienced significant premium increases for many reasons, but since the passage of the National Association of Insurance Commissioners' Rate Stabilization Model Act, there have been fewer increases on newer policies (Read more: "What's ahead for long term care insurance" ). Currently, hybrid long-term-care/life insurance policies are experiencing growth, but these complex policies are not a solution, as they are a step away from providing a direct protection against the specific risk being insured, which means they are more expensive than a stand-alone LTC policy. A new issue coming up is that some states have "filial responsibility" laws that obligate adult children to financially support their parents and are starting to be used by some nursing homes.  Read about it here. 4. Will insurance agents go extinct? No, insurance agents will not be going away. However, the way that insurance agents currently do business and have historically done business will be going away. With greater access to information and technology, insurance agents will become true advisers to their clients rather than simply transacting product sales. Professional insurance agents provide value to consumers when they help them understand how insurance policies work and when they assist consumers in making wise choices. The insurance agents who survive will be the ones who recognize that they need to align their interests with those of consumers and work in their best interests by recommending insurance coverage that consistently meets the needs of their clients. Insurance agents will need to follow the concepts outlined in The Insurance Bill of Rights. Mark Twain said, "The reports of my death have been greatly exaggerated," and this certainly applies to insurance agents. 5. Will consumers finally discover the value of disability insurance?  Disability insurance is the most overlooked financial tool. Disability insurance is a necessity for anyone who depends on their income. If we are discussing a mandatory insurance coverage, disability insurance should be at the top of the list. Three in 10 workers entering the workforce today will become disabled for some period before they retire (Social Security Administration, Fact Sheet, January 31, 2017). This point was brought home by the fact that Colin Kaepernick did not play this year for the San Francisco 49ers until they purchased a disability insurance policy for him. Read more here. 6. Has the annuity marketplace hit its turning point?  The current annuity marketplace is filled with complex annuity options that are increasingly challenging for an insurance agent to understand, let alone being understandable for consumers, especially seniors, who are heavily marketed to. The annuity industry continues to face significant market conduct issues in terms of suitability and disclosures (Read about the investigation by the New York Department of Financial Services). Annuity companies that think outside the box and provide low-cost, easy-to-understand solutions will gain popularity. A number of leaders in the financial planning area are already discussing the value of single-premium immediate annuities in investment portfolios to help offset longevity risk (living too long). This will only happen with low-cost annuities and where agents can really provide value by recognizing and solving challenges that can only be addressed with annuities that serve the consumer by getting back to the core function of annuities. 7. Have we reached the tipping point for when the impact of the prolonged low-interest-rate environment will fully emerge on interest-sensitive life insurance policies?  The majority of universal life policies issued are facing the hidden danger of terminating long before they are expected to. This is due to lower-than-projected credited interest rates, which has led to reduced cash values. If a life insurance policy reaches a cash value of zero, it will terminate unless it has a no-lapse guarantee. The only way to keep the policies in force is to increase the premium, however, life insurance companies, for the most part, are not advising policy owners that they need to increase the premium and specifying the amount by which the premium needs to be increased. This situation has been exacerbated by the fact that a number of life insurance companies have had to increase their mortality costs (cost of insurance charges) to maintain profitability. Continuing to ignore this issue is going to have significant long-term ramifications for the stability and trust in life insurance companies and life insurance agents. This is affecting all types of life insurance that are not guaranteed products, just not as directly. Read more: Will Your Life Insurance Terminate Before You Do? See also: 10 Predictions for Insurtech in 2017   8. Is there truly an insurtech company that can add core value to the insurance process? The insurance industry needs evolution, and not revolution. The majority of insurtech companies are really bringing us more of the same; they are really just "dressed up" insurance brokerages and insurance insurance companies. And while some do make use of technological breakthroughs, they are not making insurance breakthroughs, which is an important distinction. The real breakthroughs will come from when consumers can more easily understand insurance products and pricing and companies can use data to provide truly customized insurance product pricing, streamline underwriting, simplify products and riders and provide insurance products that people need, thereby eliminating those that don't have a useful purpose. 9. Is it time for insurance policies to finally be used primarily for insurance purposes? The insurance industry will recognize that it must get back to its core function, which is protecting against potential risks. When this happens, it will lead to better-optimized insurance products for consumers and longer-term business for insurance companies. This will especially be true in the areas of life insurance and annuities when the trend becomes using insurance to address non-insurance issues. Insurance is just insurance. 10. Will the insurance industry discover excellent customer service? Quality policy owner service is not something that the insurance industry as a whole is known for. Companies that provide top-notch customer experiences thrive, are well-known for doing so and can be easily named (think: Nordstrom, Disney and Apple). Other companies are known for poor customer service, while most remain in the middle. FedEx, which used to be known for top service, now delivers packages at any time and leaves them all over the place. The point is that a quality policy owner experience will revolutionize the insurance process. If the insurance industry can learn to "delight" consumers at every step along the way from the policy selection process, policy application and underwriting process, policy monitoring and claims service, then the insurance industry will really move forward. The Bottom Line Greater insurance literacy will benefit consumers and members of the insurance industry. Following the guidelines of The Insurance Bill of Rights is what will move the insurance industry forward. Ask your agent and insurance company if they've taken The Insurance Bill of Rights Pledge and look for the Insurance Bill of Rights Seal on their website. If they haven't taken it, ask them why not or what they have to hide about fairness and disclosure -- and join The Insurance Bill of Rights Movement by signing the petition to support The Insurance Bill of Rights (click here). If you have any feedback or your own questions for 2017, please let me know. Thanks for reading.

There’s a lot of attention being given at the moment to the startup firms that are entering the insurance market in the hope of grabbing attention and business by disrupting the established ways of doing things. And some of these insurtech startups are indeed introducing new and exciting ideas to the market. Disruptive thinking has its upside, and customers will benefit from it. Does it have a downside as well, though? There’s a view that, to be successful, disruptors need to “delight in breaking rules, but not rules that matter.” This view can lend startups a certain piratical air, yet it can also cause them to see the rules that get in their way as the rules that don’t matter. That’s why we’ve seen some high profile insurtech startups crashing into regulatory brick walls: Zenefits is a classic example of this. Now,  I’m not saying that startups shouldn't hit problems, even regulatory ones, but what I am saying is that they should at least get the basics right, even if the basics are themselves disruptive to the work of disruptors. The U.K.’s Information Commissioner made this clear to the insurance industry in 2015 when he pointed out that “big data is not a game played by different rules.” See also: An Eruption in Disruptive InsurTech?   I’m also not asking for insurtech startups to occupy the high moral ground, but I am saying that they cannot reinvent "doing business" in ways that sidestep the ethical values that consumers expect firms to uphold. Nailing business values like "innovative" and "disruptive" to your piratical mast won’t stop inconvenient winds like "honesty" and "fairness" from pushing your exciting voyage toward the hard rocks of reality. It is with terms such as honesty and fairness that customers often describe what a "good financial services firm" feels like. Yet insurtech start-ups are often being urged to disrupt customer expectations, seeing them as a quaint left-over from an old way of doing things. The future is instead said to lie in insurance providers getting closer to their customers in all sorts of ways. Yet isn’t business success more reliant on customers wanting to get closer to firms? It’s the latter that leads to the former, not the other way around. The danger is that disruptors’ natural and essential super-confidence in themselves is translated into overconfidence in the ethical correctness of their decisions and judgments. And there’s then the tendency for them to believe that other people think the same way as they do. Both are fairly normal traits that we all exhibit in some form or other in our everyday lives. I certainly do, and my daughters have pulled me up short with one or two of the decisions I’ve made. See also: The State of Ethics in Insurance   And that sort of challenge, that sort of "knowing you but through different eyes" is vital for insurtech startups. While insurance needs disruptive startups, they in turn need disruptors of group think, of the wrong sorts of overconfidence. As the folklore of startups fills with tales of disruptors being told they’re not being overconfident enough in their business plans, let’s put out a marker of hope for 2017, that it will see tales of disruptors being told they’re not being ethical enough in their business plans, that they’re not doing enough to earn the trust of consumers. It’s very possible, if the market and those advising them want it.

In the 2013 movie “Her,” Theodore Twombly, a lonely writer, falls in love with a digital assistant designed to meet his every need.  She sorts emails, helps get a book published, provides personal advice and ultimately becomes his girlfriend. The assistant, Samantha, is A.I. software capable of learning at an astonishing pace. Samantha will remain in the realm of science fiction for at least another decade, but less functional digital assistants, called bots, are already here. These will be the most amazing technology advances we see in our homes in 2017. Among the bestsellers of the holiday season were Amazon.com’s Echo and Google Home. These bots talk to their users through speakers, and their built-in microphones hear from across a room. When Echo hears the name “Alexa,” its LED ring lights up in the direction of the user to acknowledge that it is listening. It answers questions, plays music, orders Amazon products and tells jokes. Google’s Home can also manage Google accounts, read and write emails and keep track of calendars and notes. Google and Amazon have both opened up their devices to third-party developers — who in turn have added the abilities to order pizza, book tickets, turn on lights and make phone calls. We will soon see these bots connected to health and fitness devices so that they can help people devise better exercise regimens and remember to take their medicine. And they will control the dishwasher and the microwave, track what is left in the refrigerator and order an ambulance in case of emergency. See also: What Do Bots Mean for Insurance?   Long ago, our home appliances became electrified. Soon, they will be “cognified”: integrated into artificially intelligent systems that are accessed through voice commands. We will be able to talk to our machines in a way that seems natural. Microsoft has developed a voice-recognition technology that can transcribe speech as well as a human and translate it into multiple languages. Google has demonstrated a voice-synthesis capability that is hard to differentiate from human. Our bots will tell our ovens how we want our food to be cooked and ask us questions on its behalf. This has become possible because of advances in artificial intelligence, or A.I. In particular, a field called deep learning allows machines to learn through neural networks — in which information is processed in layers and the connections between these layers are strengthened based on experience. In short, they learn much like a human brain. As a child learns to recognize objects such as its parents, toys and animals, neural networks learn by looking at examples and forming associations. Google’s A.I. software learned to recognize a cat, a furry blob with two eyes and whiskers, after looking at 10 million examples of cats. It is all about data and example; that is how machines — and humans — learn. This is why the tech industry is rushing to get its bots into the marketplace and are pricing them at a meager $150 or less: The more devices that are in use, the more they will learn collectively, and the smarter the technology gets.  Every time you search YouTube for a cute cat video and pick one to watch, Google learns what you consider to be cute. Every time you ask Alexa a question and accept the answer, it learns what your interests are and the best way of responding to your questions. By listening to everything that is happening in your house, as these bots do, they learn how we think, live, work and play. They are gathering massive amounts of data about us. And that raises a dark side of this technology: the privacy risks and possible misuse by technology companies. Neither Amazon nor Google is forthcoming about what it is doing with all of the data it gathers and how it will protect us from hackers who exploit weaknesses in the infrastructure leading to its servers. Of even greater concern is the dependency we are building on these technologies: We are beginning to depend on them for knowledge and advice and even emotional support. The relationship between Theodore Twombly and Samantha doesn’t turn out very well. She outgrows him in intelligence and maturity. And she confesses to having relationships with thousands of others before she abandons Twombly for a superior, digital life form. We surely don’t need to worry yet about our bots becoming smarter than we are. But we already have cause for worry over one-sided relationships. For years, people have been confessing to having feelings for their Roomba vacuum cleaners — which don’t create even an illusion of conversation. A 2007 study documented that some people had formed a bond with their Roombas that “manifested itself through happiness experienced with cleaning, ascriptions of human properties to it and engagement with it in promotion and protection.” And according to a recent report in New Scientist, hundreds of thousands of people say "Good morning" to Alexa every day, half a million people have professed their love for it, and more than 250,000 have proposed marriage to it. See also: Top 10 Insurtech Trends for 2017   I expect that we are all going to be suckers for our digital friends. Don’t you feel obliged to thank Siri on your iPhone after it answers your questions? I do, and have done so.

As an industry, we are knowledgeable. In fact, I think one could say that insurers may know more about the way the world works than most other industries. We hold the keys to risk management and the answers to statistical probability. We underpin people, businesses and economies world-wide. We have centuries of real-world experience and decades of real-world data dealing with individuals, groups, businesses, property, life, investments and health. Yet, in 2017, none of that experience will matter unless we are willing to embrace an entirely new field of knowledge. The convergence of technology with digital, mobile, social, new data sources like the Internet of Things (IoT) and new lifestyle trends will make insurers better, smarter and more successful IF we are willing to “go back to school” and audit the class on modern, innovative insurance models, generational shifts in needs and expectations and disruptive technologies. This class is largely self-taught. Between you, Google, traditional and new media (think Coverager, Insurance Thought Leadership and InsurTech News), social networks and a few hours each week, you can expand your horizon toward the future to become a knowledgeable participant in 21^st century insurance. It will help, however, if you know what to search for. In this blog, I’m going to give you five high-level areas to keep tabs on in the coming months. These are the places where technology and market shifts are going to create massive competitive energy in the coming year. Insurtech, Greenfields and Startups As of this writing, AngelList (a startup serving startups,) lists 1,069 insurance-related startups. Many of these are new solution technology companies. Others are new insurance companies or MGAs focusing on new market segments, new products and new business models. The influx of capital from venture capital firms, reinsurers and insurers has advanced the proliferation of startups and greenfields based on new tech capabilities. Business model disruption will continue to be mind-boggling, exciting and scary all at the same time — bringing insurtech into the mainstream and powering the industry-wide wave of innovation. Whether you are sifting through ideas to improve your competitive position, launch a new insurance startup or greenfield, seek partners actively engaged in insurtech or invest or acquire a new technology startup, insurtech companies and their growing numbers are to be watched. Reading through these types of lists will give you a feel for the expansive nature of insurance. You’ll see how marketing minds are turning traditional insurance concepts into relevant products and solutions that fit today’s and tomorrow’s lifestyles. Be inspired to engage in insurtech in 2017, because time is of the essence. For background, start by reading Seed Planting in the Greenfields of Insurance. See also: 10 Predictions for Insurtech in 2017   Artificial Intelligence and Cognitive Computing AI and cognitive computing technologies like IBM’s Watson have been touted as the link between data and human-like analysis. Because insurance requires so much human interaction and analysis regarding everything from underwriting through claims, cognitive computing may be insurance’s next solution to better analyze, price and understand risks using new data sources and add an engaging and personalized advisory interface to their services to achieve efficiency and improvements in effectiveness as well as competitive differentiation. Cognitive computing’s speed makes it a great candidate for underwriting, claims and customer service applications and any task requiring near-instant answers. IBM and Majesco recently announced a partnership to match insurance-specific functionality with cloud and cognitive capabilities. This will be an area to watch throughout 2017. On-Demand, Peer-to-Peer and Connected Insurance Trov allows individuals to insure the things they own, only for the periods during which they need to insure them. Cuvva is betting that people will want to have insurance on their friend’s cars during the time in which they borrow them. Slice launched on-demand home-share insurance to hosts using homeshare platforms like Airbnb, HomeAway, OneFineStay and FlipKey. Verifly offers on-demand drone insurance. Insurance startups are filled with companies that are providing insurance to the new spaces, places, behaviors and lifestyles where insurance is needed. Other startups are using social networks and the Internet of Things to bring parity to insurance, often lowering premiums. Peer-to-peer insurers like Friendsurance and Lemonade put customers into groups where the group’s members pool their premiums, payment for claims come from the pool and, in the case of Lemonade, leftover premium is contributed to social causes. Metromile uses real usage data to provide fair auto insurance premiums. Here is a space where insurers must keep their eyes open for opportunities. How can P&C insurers cover those who don’t own a car, but who still drive periodically? How will group health insurers help employers lower their rate of medical claims? How will life insurers promote wellness and reduce premiums?  Many of the answers will be found in digital connections, social knowledge, IoT data and an ability to provide timely, instant and on-demand coverage.  For more insight, start reading 2016’s Future Trends: A Seismic Shift Underway and the soon-to-be-released update. The Revival of Life Insurance One area that will receive a much-needed insurtech stimulus will be life insurance. The life insurance industry ranks last as noted in the recent research, The Rise of the New Insurance Customer: Shifting Views and Expectations; Is Your Business Ready for Them?, which is likely reflected in the decline of life insurance purchases over the past 50 years. The 2010 LIMRA Trends in Life Insurance Ownership report notes that U.S. individual life insurance ownership had dropped to the lowest rate in 50 years, with the ownership rate at just 44%. As new simplified products are introduced, new data streams proliferate and real-time connections improve, life products are poised to change. Already, new life insurers and traditional life insurers are positioning to use connected health data as a factor in setting premiums. John Hancock’s Vitality is perhaps the best current example, but other players are entering the mix — many simply claiming to have a better methodology for selling and servicing life policies. Haven Life, owned by Mass Mutual, and companies such as Ladder, in California, are reinventing term insurance … from simplifying the product to creating an “Amazon-like” experience in buying in rapid time. Ladder, in particular, uses a MadLibs-type underwriting form that’s not only relevant but fun to use. The life insurance industry is hampered by decades-old legacy systems and the cost of conversion and transformation is taking too long and costing too much. As a result, look for existing insurers to begin to launch new brands or new businesses with modern, cloud core platforms to rapidly innovate and bring new products to market for a new generation of customers, millennials and Gen Z. As we saw in 2016, most new entrants are aimed at term products that will sell easily and quickly to the underserved Gen Z and millennial markets. New life players and products, as well as existing life insurers, reinsurers and even P&C insurers seeking to capture this opportunity will be interesting to watch in 2017. See also: What’s Next for Life Insurance Industry?   Cloud and Pay-As-You-Use If your company is underusing or not using cloud computing with pay-as-you-use models, 2017 should be a year for assessment. Though cloud use isn’t new, its business case is picking up steam. Search “cloud computing and insurance” and you’ll find that the reasons companies are seeking cloud solutions are evolving. The case for core system platform in the cloud reached the tipping point in 2016 … from nice to consider to a must have, and it will be the option of choice in 2017. The logic has grown as capabilities have improved, cost pressures have increased and now the demand for speed to value and effective use of capital on the business rather than infrastructure is gaining priority. Incubating and market testing new products in a fail-fast approach allows insurers to see quick success and capitalize on pre-built functionality with none of the multi-year implementation timeframes. Increasingly, many insurers are taking advantage of the same pay-as-you-use principles of cloud as consumers themselves. They are paying as they grow, with agreements that allow them to pay-per-policy or pay based on premiums. They are using data-on-demand relationships for everything from medical evidence to geographic data and credit scoring. They use technology partners and consultants in an effort to not waste downtime, capital, resources and budgets. They are rapidly moving to a pay-as-they-use world, building pay-as-they-need insurance enterprises. This is especially true for greenfields and startups, where a large part of the economic equation is an elegant, pay-as-you-grow technology framework. They can turn that framework into a safe testing ground for innovative concepts without the fear of tremendous loss, while having the ability grow if the concepts are wildly successful. Major insurance research firms advocate cloud as a smart approach to modernizing infrastructure and building new business models. Keeping cloud on your company’s radar is crucial and good place to start is reading The Insurance Renaissance: InsureTech’s Pay-As-You-Go Promise. These are just a few of the areas we should all be watching throughout 2017, but the vital step is to take your new knowledge and apply your “actionable insights” throughout your organization, powering a renaissance of insurance. Make 2017 your company’s Year of Insurance Renaissance and Transformation!

As your transition team morphs into your operations group, I thought I would take a moment to give my thoughts on ACA as a seasoned consultant to this industry. While I hear the blustering about repeal and replace, it is my strong belief that any successful bi-partisan remake of healthcare will need to build from the success of President Obama’s signature legislation. In building consensus, President-elect Trump may wish to throw a bone and acknowledge that reducing the ranks of the uninsured was a win, and it was not the only one. Here is my scorecard for the ACA: High marks: Facilitating the shift from fee-for-service to fee-for-value healthcare by supporting the Accountable Care model is important. Comparative effectiveness research, which creates national models for best practices in care delivery, has moved the cost of care, albeit too slowly, in the right direction. For example, a recent study in the Annals of Internal Medicine establishes that reimbursement penalties for hospital readmissions have reduced these by 77 out of 10,000 admissions. Eliminating pre-existing conditions, benefit maximums and coverage rescissions is a critical change effected by ACA that must be retained. If coverage is purchased under the rules as developed, it is unconscionable that an insurance policy can simply no longer respond. See also: What Trump Means for Health System   Average grades: Coverage for all children to age 26 added coverage for millions of our healthiest population. Uniform coverage for children who have yet to be established as adults is important. But to what extent? Should employers also have to cover the non-dependent adult children of their workers? The extended coverage is a generally good idea, but a small tweak would move it to the high marks section: require that the child be a tax-qualified dependent no older than 26. We should have a coverage mandate; however, to make this effective it should have teeth. In Australia, the penalty for not having coverage is significant enough that younger adults wouldn’t consider the risk/reward tradeoff of “rolling the dice” to be a viable option. We should do the same and also provide age-banded rates that are not as punitive to the younger insured. Everyone has to be in the system because opting out has a backstop, too. Even prior to ACA, Americans had a coverage stopgap. If one was sick enough and needed care, pre-ACA, it would have been dispensed in the hospital. Medicaid expansion is an excellent way to bring basic benefits to Americans who simply can’t afford healthcare. However, any new healthcare initiative has to find a way to mandate national standards for providing care for the indigent. Providing coverage for those with income at 18% of the federal poverty level or less is absurd, yet is a standard in two states for eligibility. Someone at that level can’t even afford food – there is no way they would pay into a healthcare system. Care should be basic and should have individual accountability built in – even the poor need to help control healthcare expenditures. Employers should have to provide coverage meeting minimum standards, but the convoluted state-mandated benefits should be simplified and national standards should be established. This would also facilitate selling coverage across state lines and increase competition. Failing grades: Community rating makes sense in the small group marketplace. Standardized plans and rates simplify this market. But eligibility leakage such as association plans and PEOs (professional employer organizations), which are allowed to underwrite risk, “cherry-pick” the risk pool and ultimately create an insurance death-spiral. The Cadillac Tax is a stupid way to finance healthcare change. Instead, the plans should have an actuarial value threshold that sets deductibility limits. If a business wishes to provide a higher level of benefits it should be able to, but the deduction would be disallowed. There is no reason an employer should be taxed for older demographics or a sicker work force that might increase premiums above the “Cadillac” premium limit. The administrative complexity of ACA has to go. The exchanges are a bureaucratic nightmare. The reporting structure consumes needless resources for very little benefit. Policing the new system would be simple. The states would determine Medicaid eligibility, and the tax reporting system would capture those individuals without coverage. See also: What Trump Means for Healthcare Reform Other suggestions: Establish price controls on brand name drugs that take into account financial incentives for inventiveness. A single drug available to treat a medical condition is like a monopoly, and it is against public policy for a monopoly to set rates (for example water or electric rates), so why should a drug company set an unconscionable price for a drug that cures hepatitis C or cancer? If one has that condition, he will pay anything to cure it. But it is the employer or the insurance carrier that bears the bigger financial burden. Perhaps there should be a separate award for that inventiveness not paid by the direct users -- instead, a drug and medical innovation tax on insurance policies. Drug price transparency should be immediately introduced. Drug rebates that obfuscate the true cost of medicine and either hide pharma profits or shift money back to the employer or plan administrator are ridiculous. Get rid of them. It is an incredible time to be in healthcare!

We are entering a new era for global insurers, one where business interruption claims are no longer confined to a limited geography but can simultaneously have an impact on seemingly disconnected insureds globally. This creates new forms of systemic risks that could threaten the solvency of major insurers if they do not understand the silent and affirmative cyber risks inherent in their portfolios.

On Friday, Oct. 21, a distributed denial of service attack (DDoS) rendered a large number of the world’s most popular websites — including Twitter, Amazon, Netflix and GitHub — inaccessible to many users. The internet outage conscripted vulnerable Internet of Things (IoT) devices such as routers, DVRs and CCTV cameras to overwhelm DNS provider Dyn, effectively hampering internet users' ability to access websites across Europe and North America. The attack was carried out using an IoT botnet called Mirai, which works by continuously scanning for IoT devices with factory default user names and passwords.

The Dyn attack highlights three fundamental developments that have changed the nature of aggregated business interruption for the commercial insurance industry:

1. The proliferation of systemically important vendors

The emergence of systemically important vendors can cause simultaneous business interruption to large portions of the global economy.

The insurance industry is aware about the potential aggregation risk in cloud computing services, such as Amazon Web Services (AWS) and Microsoft Azure. Cloud computing providers create potential for aggregation risk; however, given the layers of security, redundancy and the 38 global availability zones built into AWS, it is not necessarily the easiest target for adversaries to cause a catastrophic event for insurers.

See also: Who Will Make the IoT Safe?

There are potentially several hundred systemically important vendors that could be susceptible to concurrent and substantial business interruption. This includes at least eight DNS providers that service over 50,000 websites — and some of these vendors may not have the kind of security that exists within providers like AWS.

2. Insecurity in the Internet of Things (IoT) built into all aspects of the global economy

The emergence of IoT with applications as diverse as consumer devices, manufacturing sensors, health monitoring and connected vehicles is another key development. Estimates state that anywhere from 20 to 200 billion everyday objects will be connected to the internet by 2020. Security is often not being built into the design of these products with the rush to get them to market.

Symantec’s research on IoT security has shown the state of IoT security is poor:

• 19% of all tested mobile apps used to control IoT devices did not use Secure Socket Layer (SSL) connections to the cloud.
• 40% of tested devices allowed unauthorized access to back-end systems.
• 50% of tested devices did not provide encrypted firmware updates — if updates were provided at all.
• IoT devices usually had weak password hygiene, including factory default passwords; for example, adversaries use default credentials for the Raspberry Pi devices to compromise devices.

The Dyn attack compromised less than 1% of IoT devices. By some accounts, millions of vulnerable IoT devices were used in a market with approximately 10 billion devices. XiongMai Technologies, the Chinese electronics firm behind many of the webcams compromised in the attack, has issued a recall for many of its devices.

Outages like these are just the beginning.

Shankar Somasundaram, senior director, Internet of Things at Symantec, expects more of these attacks in the near future.

3. Catastrophic losses because of cyber risks are not independent, unlike natural catastrophes 

A core tenant of natural catastrophe modeling is that the aggregation events are largely independent. An earthquake in Japan does not increase the likelihood of an earthquake in California.

In the cyber world consisting of active adversaries, this does not hold true for two reasons (which require an understanding of threat actors).

First, an attack on an organization like Dyn will often lead to copycat attacks from disparate non-state groups. Symantec maintains a network of honeypots, which collects IoT malware samples. A distribution of attacks is below:

• 34% from China
• 26% from the U.S.
• 9% from Russia
• 6% from Germany
• 5% from the Netherland
• 5% from the Ukraine
• Long tail of adversaries from Vietnam, the UK, France and South Korea

Groups such as New World Hacking often replicate attacks. Understanding where they are targeting their time and attention and whether there are attempts to replicate attacks is important for an insurer to respond to a one-off event.

See also: Why More Attacks Via IoT Are Inevitable  

A key aspect to consider in cyber modeling is intelligence about state-based threat actors. It is important to understand both the capabilities and the motivations of threat actors when assessing the frequency of catastrophic scenarios. Scenarios where we see a greater propensity for catastrophic cyber attacks are also scenarios where those state actors are likely attempting multiple attacks. Although insurers may wish to seek refuge in the act of war definitions that exist in other insurance lines, cyber attack attribution to state-based actors is difficult — and, in some cases, not possible.

What does this mean for global insurers?

The Dyn attack illustrates that insurers need to pursue new approaches to understanding and modeling cyber risk. Recommendations for insurers are below:

1. Recognize that cyber as a peril expands far beyond cyber data and liability from a data breach and could be embedded in almost all major commercial insurance lines.
2. Develop and hire cyber security expertise internally — especially in the group risk function — to understand the implications of cyber perils across all lines.
3. Understand whether basic IoT security hygiene is being undertaken when underwriting companies using IoT devices.
4. Partner with institutions that can provide a multi-disciplinary approach to modeling cyber security for insurers, including:

• Hard data (for example, attack trends across the kill chain by industry);
• Intelligence (such as active adversary monitoring); and
• Expertise (in new IoT technologies and key points of failure).

Symantec is partnering globally with leading insurers to develop probabilistic, scenario-based modeling to help understand cyber risks inherent in standalone cyber policies, as well as cyber as a peril across all lines of insurance. The Internet of Things opens up tremendous new opportunities for consumers and businesses, but understanding the financial risks inherent in this development will require deep collaboration between the cyber security and cyber insurance industries.

Answering the growing demand for cyber risk insurance, many carriers have joined the market. But buying a policy for an organization, especially for the first time, can be a confusing process. Not only are insurance carriers inconsistent in the type of coverage they offer, but buying this type of insurance is different than the more common policies, such as general liability. “Businesses have a difficult time determining the probability of suffering a loss and the potential size of a claim,” says Bill Wagner, a partner in the Indianapolis office of legal firm Taft. “In addition, there are no standard policies.” One misconception among buyers is risk exposure. For example, who bears the liability if a third party — such as a payroll service, data warehousing or cloud provider — causes the breach? See also: Promise, Pitfalls of Cyber Insurance   “A lot of companies assume that by signing a contract with a vendor, they’ve outsourced or got rid of the liability — and that’s almost never the case,” says Dave Wasson, cyber liability practice leader at insurance brokerage Hays Cos. A common mistake is rushing to buy a policy without assessing the vulnerabilities first, says Christine Marciano, president and CEO at Cyber Data-Risk Managers, which specializes in cyber insurance. “Companies should know first where their data is residing, what type of data they are holding, and the security around their network and their employees,” Marciano says. Some of the main categories of cyber insurance coverage are:

• Security and privacy liability: Damages typically related to data breaches that affect a third party.
• Regulatory defense: Most policies cover fines and penalties, in addition to defense costs, for an investigation by a regulatory agency.
• Data recovery: Costs for restoring or recreating data that was damaged or stolen.
• Crisis services: Services necessary after an actual or suspected data breach; they could include computer forensics, breach notification, credit monitoring and public relations.
• Business interruption: Typically relates to loss of business income due to a cyber attack.
• Data extortion: Coverage for incidents such as ransomware attacks if the threat is deemed credible.

Not all insurers include these categories with the core policy. Some offer them as add-on coverage as well as impose smaller coverage limits. See also: The State of Cyber Insurance   What you need to know Based on tips from Wagner, Wasson and Marciano, here are some basic things organizations new to cyber insurance should know: 1. Policy conditions: Carriers may deny a claim if practices or minimum standards that were listed in the coverage application are missing or have changed. Know the conditions you must follow for the coverage to remain in effect. Wasson strongly cautions against buying the kind of policy that imposes the minimum standards or practices condition. He calls it “essentially a mistakes exclusion” and says it’s not common in other types of insurance. 2. Exclusions: Just as important as what’s covered is what isn’t. The list of exclusions can be extensive and can include such things as network negligence (e.g. unpatched software), chargebacks (such as when credit card numbers are stolen) and failure to upgrade technology. 3. Expert panel: Most plans come with a preapproved panel of crisis-response vendors. If you have an established relationship with your own vendor, the insurance company may be willing to approve that company for the panel. 4. Prior acts: It could take a long time for a breach to be discovered, which means cyber attackers could be lurking in the network for months — and sometimes years. Some carriers offer additional coverage for prior acts, incidents that the policyholder doesn’t know about yet and that happened prior to the retroactive policy date. 5. Jurisdiction: State laws are different and, in the event of a lawsuit, the location of the court will impact the interpretation of the contract and the damages. Wagner says the state law should be the leading factor in determining the type of policy and that the amount of coverage should be discussed with the insurance broker and legal team. 6. Policy amount: Since there is not enough actuarial data showing how much a loss would cost and the amount of the claim depends on various variables, there’s no golden rule for how much coverage you will need. Some companies look to research such as Ponemon Institute’s Cost of Data Breach surveys. But Marciano says it often comes down to what the company can afford. “(The limits) tend to be expensive, and the smaller companies often can’t go for the higher limits,” she says. See also: Cyber Rules May Be Only Weeks Away   Wasson says determining the adequate limit is the most difficult part of his job. “We know what a good policy looks like,” he says, “so sometimes the only question is: Is the insured willing to pay for the best policy, or do they want the cheapest thing that meets contractual obligations?” This article was first published on ThirdCertainty and was written by Rodika Tollefson.

I was scanning the Insurance Thought Leadership site, and saw the Most Popular Article today is Insurance is not a commodity, by Chet Gladkowski. Number 10 on this same list was Lemonade – Insurance is changed forever, by Rick Huckstep. Both articles were well written and thought provoking (for us folks in the insurance industry). For the average consumer, I suspect both articles would probably not be read or certainly not rise to the top 10 list of non-industry professionals / consumers.  I believe the biggest threat to our future as agents and the insurance industry is not technology, generational change, a global economy, AI, innovation, etc. I believe it is, to quote Pogo – “we have found the enemy and he is us!” The Insurance, Financial Services and Risk Industries exist for customers / clients, yet we as the “vendors” or “service professionals” for this industry – all too often think it’s about us. We tend to define our business model in terms of products and services offered versus clients served. We are self- defined as P&C agents, Life and Financial Service professionals, Risk Managers, Bankers, Consultants, etc. We tend to be “product defined and product driven” versus “client defined and client driven.” What if we became experts first in our clients and their wants and needs and facilitated their buying versus being “sales reps” for the manufacturers – the insurance companies, banks, brokerage firms, etc. See also: Has Auto Insurance Become a Commodity?   Here’s reality – as I perceive it – sometimes buyers just need / want a commodity (term life), a product (BOP or group policy) or a service (a self-funder plan or retirement planning). My experience indicates that most consumers “want what they want and they want it now” on their terms and with their definitions.  Our industry will protect our future when we look more to the marketplace and spend less time looking in the mirror! Below is an article written months ago yet appropriate food for thought in light of the above - are you like Southwest Airlines or a bad gelato store? What did you do for me today?  I was flying back from Milwaukee. The bad news is that I had to spend time in airports and airplanes. The good news is that I got out before it got crowded and the best news is that I flew Southwest Airline (SWA). In my opinion, flying can be worse than a root canal. What makes SWA different is they use enthusiasm and fun to “sedate” you from the pain of the flying process (cramped space, bad weather, security checkpoints, etc.). If you haven’t flown with SWA before – try it you’ll like it. If you have you’ll understand what follows. It’s the simple things – a smiling face, a pilot and attendants who inject humor and song into the mundane process of telling us what we need to know but don’t want to hear. They even give you two small bags of peanuts (instead of one). I know this sounds insignificant until you’ve flown on airlines that don’t sedate you. When we deplaned in Atlanta I stopped at a Gelato stand in the Concourse. I was reminded of what a root canal without the sedation is like. The “lady” behind the counter came across as a Don Rickles’ type character without his charm. She served me a scoop of Chocolate Chip Gelato (about the size of a golf ball) in a cup the size of a single shot jigger. The Gelato was very good – the service and presentation weren’t. At $5.99 a scoop – I don’t think it’s wrong to expect a smile, kind word, or a thank you. In the name of full disclosure – I think I presented myself well to the “lady” – I think I was my cute, charming and polite Southern Gentleman self. She may have been having a bad day – which we all do. Nonetheless my experience is determined by what happened to me not what may have been happening in her world that day. I was the customer! Here’s the parallel to the agency business. I realize, whether you are an airline, Gelato stand, or Agency, customer service is not always easy. You have hundreds (thousands?) of customers that have to buy insurance or use the product they’ve already bought. Some have just had a claim, others an audit, others a loss control inspection and still others merely need to make a change to the policy. Some are nice people, some are nice people having a bad day, and some are not so nice whether their day is good or bad. Like an airport, dealing with the insurance industry is not the most exciting part of anyone’s day.  See also: Agents: What’s That Spot on Your Face?   Agents measure themselves against Best Practice Guides. These guides “count” what you did or will do. It measures “things” you do every day. Retention and additional sales of policies and clients – in my opinion – is the more important measure of success or failure. Are your customer’s “coming back for seconds” or will they be like me and “avoid your Gelato stand next time they need something sweet to eat.” About 35 years ago I wrote a column in national publication about “whether agents sell a product, commodity, or service?” Today I realize that I missed the point – it is not what agent’s sell, it is about what clients “perceive” (feel) they receive from what they buy. It is about the experience created for them in dealing with you and the carrier. Will their memories include a kind or comforting word you offered, the help needed, a smile, song, or a “second bag of peanuts? Will their experience keep them coming back for more, whether that is for a commodity, product, service or a similar experience?