At the 2017 PRIMA Annual Conference, a session discussed real-world examples of high-profile police shootings where media coverage and public perception affected litigation with allegations of police brutality. The speakers included:

• Michele Molinario – Partner, Jones Skelton & Hochuli
• John DiCaro – Partner, Jones Skelton & Hochuli

Are there more officer-involved shootings now than previously? There are no firm statistics on this, but the Washington Post estimates close to 1,000 shootings last year. Thus far in 2017, there have been fewer than 400 shootings. In spite of the publicity around officer-involved shootings, very few officers are convicted of a crime because of a shooting. Media coverage and celebrities have been highlighting some police shootings without full command of the facts,  which taints public perception of law enforcement and taints potential jury pools. The speakers discussed certain high-profile cases: Laquan McDonald

• Oct. 20, 2014
• Chicago
• Carrying a knife and breaking into cars
• Slashed tires on a patrol vehicle
• Disobeyed verbal demands
• Officer shot McDonald 16 times within a few seconds of arriving on scene.

Was the shooting justified? The first question to ask is, “What were the police investigating at the time of the shooting?” In this case, the person was known to be armed and committing crimes. Another question is always whether the person shot was a threat to officers at the time of the shooting. There were reports he was acting “crazed,” had threatened officers and had lunged toward officers. According to police training videos, a minimum reactionary gap of 20 feet is required for officers to draw their weapon and fire if an armed person attacks them. If the distance is less than 10 feet, there is little chance the officer can draw a weapon and fire before being stabbed. See also: Police Shooting Shows Gaps in Work Comp   Among the issues that need to be addressed during trial:

• Did the officer assess the scene prior to firing?
• Was more force used than necessary?
• Inconsistencies between video and police report.

From the media standpoint, the focus was on the number of shots fired, which many felt was excessive. They also focused on the fact that the suspect was not moving toward police at the time shots were fired. Some of the shots were clearly fired while the suspect was already on the ground. Among the discussion topics from the audience included the fact that it is very difficult to hit a moving target with a taser, and that tasers are not very effective against someone on PCP (which McDonald was). The officer in this case has been charged with first-degree murder and is awaiting trial. The city settled the civil case for $5 million. What level of force is reasonable?

• Severity for the crime and other circumstances to which the officer was responding?
• Whether the plaintiff posed an immediate threat to the safety of officers or others.
• Whether the plaintiff was actively resisting or attempting to evade arrest by flight.
• The amount of time and any changing circumstances during which the officer had to determine the type and amount of force that was necessary.
• The type and amount of force used.
• The availability of alternative methods to subdue the plaintiff.

NOTE: Each state has laws pertaining to criminal charges against police officers. Generally, reasonable justification is an affirmative defense to a criminal charge. The jury standard is beyond a reasonable doubt. Courts have said that “reasonableness” must be judged from the perspective of officers on the scene vs. a 20/20 hindsight analysis. NOTE: 42 USC 1983 statutes allow individuals to sue police officers and municipalities civilly for depriving someone of civil rights. Thus, civil cases in police shootings are usually federal cases, and the criminal cases are usually state. Walter Scott

• April 4, 2015
• Charleston, SC
• Pulled over for traffic violation (broken tail light)
• Suspect attempted to flee and was shot by officer multiple times

Officer claimed he felt there was a threat to his safety and claimed that the suspect tried to grab his taser. Before the filming started, apparently there was a physical confrontation, and the officer tried to tase the individual and missed. The officer tried to tase a second time, which was not effective. At that point, the suspect started fleeing and was shot by the officer. Courts have held that deadly force can be used against a fleeing suspect under certain circumstances, including the threat of deadly force immediately prior to the suspect fleeing. The officer in this case has been charged with murder, and the trial ended with a mistrial. 11 of 12 jurors favored conviction. A retrial has been scheduled. The officer was also charged under civil law. He plead guilty under federal law and is awaiting sentencing. He could face a life sentence. Tamir Rice

• Nov. 22, 2014
• Cleveland
• Police dispatched by 911 call with reports of person in the park with a gun threatening individuals.
• When officers arrived at the scene, they warned the suspect three times before firing.
• The video showed the plaintiff going to his waist for something under his jacket, at which time officers fired.

This case caused a lot of media attention because the suspect was 12 years old, and the pistol in his hand was a toy. The 911 caller told the dispatcher that the suspect was a child and that the gun was probably a fake, but this information was not given to officers. They were only told there was an armed suspect. The officer who fired the shots had been previously terminated by a different police department, which raised allegations of improper hiring/supervision. The city settled the civil suit for $6 million. A factor in this settlement was likely the fact that the dispatcher relayed inaccurate information. The officers were not charged. Eric Garner

• July 17, 2014
• Staten Island, NY
• Garner approached on street by law enforcement for illegally selling cigarettes.
• There was a physical confrontation, and the suspect was put in a choke hold
• Cellphone footage shows the suspect saying multiple times, “I can’t breathe,” while he is in the choke hold.

There was no criminal indictment of the officers. The city settled the civil suit for $5.9 million. The coroner ruled the cause of death was the choke hold. See also: Change Accelerates in Core Systems   Conclusions

• Over the last four years, cases occurred in seven states with large populations (CA, NY, FL, PA, OH, TX, IL)
• Most verdicts on cases taken to trial have been defense verdicts. More cases settle than get a plaintiff award at trial.
• With all the media coverage, there is not necessarily more plaintiff verdicts – even in perceived liberal jurisdictions.
• Public outcry tends to lead to quicker settlements of civil cases.
• Courts have not ruled that officers must deescalate the situation before using deadly force, but is the public demanding it?
• Some municipalities are increasing training on deescalation techniques.
• The speakers indicated they did not see a difference in settlement behavior between self-insured and insured municipalities.
• The attorney fees can often be significantly more than any damages awarded because, if the plaintiff wins anything, fees are covered. Juries are not advised of this.

The whole transportation sector is in for massive transformation. The way that people and goods will be moved from point A to point B in the future will be completely different. I am not (yet) talking about a Star Trek-style transporter, although scientists have moved matter at the atomic level from one side of a room to another, so we may eventually get there. The transformation I want to focus on is much closer. Consider the future that the young children of today may experience. They may never own a car, or understand what it means to hail a taxi, or even rent a car. The next generation will find it odd that we used to put “gas” in our vehicles and may think of driving a vehicle as something that you do in an amusement park. Imagine the future at Disney World, standing in a long line waiting for the new “1978 Camaro ride.” See also: Connected Vehicles Can Improve Claims   When you consider the impact of telematics, electric vehicles, the sharing economy, autonomous vehicles and new modes of transportation – like the Hyperloop or the fleet of drone taxis that Dubai plans to have in operation by 2020 – you start to see that these developments are not just science fiction. They are becoming science reality. Collectively, these technologies and trends have the potential to dramatically reduce accidents, improve safety and optimize vehicle usage, which are great benefits for society as a whole. For insurers, however, this is a mixed blessing. Insurers have always been some of the biggest proponents of technologies that improve the safety of vehicles. But the potential to dramatically reduce accidents also comes with the probability of dramatically reduced premiums – the bread and butter of many P&C insurance companies (for both personal auto and commercial fleets).

If you are in the insurance/risk management industry, you likely have been to many presentations. How many do you remember? How many were interesting? How many were entertaining? When learning information, the human brain will attempt to relate the new concept to a familiar concept. For example, when Henry Ford described one of his earliest automobile designs, he may have said, “It’s like a horse and carriage without the horses.” That description creates a relatable picture that offers listeners a point of reference. What picture did you see in your mind? Stories work the same way. As long as they're relatable to the audience, people will follow along. A good story connects better with the audience than straight technical material, and provides a more effective teaching method. According to a study at the University of Wisconsin, by Jill Eck, when learners are exposed to storytelling in a classroom setting they are highly engaged in the learning process and are practicing reflective learning as they process information on a deeper, more meaningful level. See also: Strategist’s Guide to Artificial Intelligence   Here are just some of the ways a story can help with your presentations:

• Helps to break the ice
• Helps to engage the audience
• Helps to relate your message
• Helps audiences retain your message
• Reinforces your point

In January 2017, I attended a RIMS event at Minnesota RIMS. During the networking cocktail party, while I was introducing myself to new people, someone stopped me and said, “I know you. You’re the ‘thousand-legger’ guy.” He saw me give a presentation almost a year earlier, in May 2016 in St. Louis, and not only remembered my story but that it was about cyber exposures. I must admit I was a little surprised, but that is how it is supposed to work. If you tell a good story and tie it back to your message, people are more likely to remember. This was just one of many times this has happened over the years, but in this case I was delighted because I added that story into my talk just before I took the stage. That day, I had my slides together, but I was still struggling with my material, and I had yet to come up with a story to help make my point. I was speaking for the first time about cyber exposures, so I spent nearly all of my time preparing the technical side of the content and gave little thought about a story to go with it. Have you ever been in that situation? I was more concerned with getting the subject matter right and was going to skip the story altogether. After giving hundreds of speeches and presentations, I've learned that what makes your message memorable and your point stick with the audience is telling a good story. As I sat there waiting to go on stage, my mind was searching for a story, and finally it came to me. I immediately perked up and began thinking about how to integrate it. I hadn’t used this story before, so it was going to be a challenge, but I knew the story would to help me connect with the audience and make an important point. I realize that you may not have tried using a story in your presentations before, and you probably have some questions and concerns, so I will share with you three suggestions to help you get started on the right path. 1. What stories work best? Though you can use any kind of story, I have found personal stories work best because you know them well and can share them from direct experience. You won’t need to rehearse it to remember it, but you should practice how to tell it. Personal stories also connect with the audience and can quickly build rapport. Humans have emotions, so take advantage of a variety of them. There are no limits other than time and appropriateness. Not all stories are interesting, though, or have a point, so you’ll want to make sure you have the right components. 2. What are the main components? A good story is like Henry Ford's car. It can take you anywhere you want to go, but it must have the right components. The first part is the set-up. You’ll need to describe the situation so that people can see it in their minds. Where does it take place? Who is there? What is happening? Be descriptive enough to enable listeners to visualize the scene. Next, it must have a problem or dilemma. People will imagine what that must be like or perhaps even picture themselves in that situation. You want your audience to connect emotionally to the problem because it creates the suspense you’ll need for the next step. Once you have them where you want them, it’s time for the climax. The climax comes in many forms. If it’s a humorous story, it’s the punch line. If it’s a serious story, it’s the turning point. In either case, the best climax has an unexpected twist that makes it more interesting or funny. Any good book, sitcom or movie has these elements. Finally, it must have a lesson, a take-home message. When it is a part of a presentation or speech, you’ll need to relate that message to your presentation to reinforce the point you’re trying to make. 3. How do you integrate it into your speech? Once you have your story, you’ll need to figure out where to inject it. Sometimes, you can start off with the story and then segue into your presentation opener. Other times, it’s better to open the presentation and then work to the story. The transition is the key. This is the part where you move into your story, in a way that is seamless and smooth. You should not say, “And now I will tell you a story.” The better you get with making the transition, the better the results will be. What you want to avoid is losing the audience in transition. If they are wondering what you are talking about or why, they will not be listening. Once you’ve told your story, you can reference that point again and again to remind the audience of the connection. This is called a “callback,” and it can be very effective. Now, let’s explore how I did it in St. Louis. The point of my cyber presentation was that the cyber risk topic is fear-based, and it’s easy to become paranoid about cyber threats. But that’s not the best way to manage the risk. When I began my talk, I set the stage for all the outside influences and pressures around the cyber threats. Then, I said, “With all the uproar about cyber attacks, it’s easy to become a little irrational. [This is the transition to my personal story.] For example, my wife is a bit of a bug freak. She hates bugs and goes crazy when there’s a bug in the house. It’s not that she is afraid of them, but she doesn’t want them in our house, and, if there’s one inside, she will stop at nothing to kill it. [The set-up.] One day, my kids were playing with Legos on the dining room table. When it was time for bed, we told them to clean up the Legos. My five-year-old son, Chase, helped for a few seconds and then disappeared, leaving my eight-year-old daughter, Melina, to clean up the bulk of them. When Melina cleared the table, she stood up and then looked at the floor. She screamed in terror. ‘There’s a thousand Legos on the floor.” I was nearby and saw the mess and knelt beside her to help. [The climax.]) A few seconds later, my wife came running in from behind us with a shoe cocked and ready to strike. She demanded, ‘Where is it?' Confused and startled, we asked, ‘Where’s what?’ She said, ‘The thousand-legger!” [The twist.] The tie-in: When you are too uptight about anything - whether it’s cyber bugs or real bugs - everything starts sounding like a threat. The lesson: It’s far better to keep the risk in perspective. See also: Innovation Pivots: 10 Lessons Learned   There was a wave of laughter, and then the point set in. From there, I continued with my presentation, but, I can tell you, I had their attention. I then presented my Cyber Exposure Wheel, a framework to help risk management quantify a company’s exposures while putting cyber risks into perspective. At the end, I concluded, “If you focus from the inside out, you won’t need to chase any thousand-leggers. You’ll be prepared for whatever threat comes your way.” [The callback.] My story was true. It was funny, and I told friends the story for a laugh. All I had to do was draw the simile of the threat of bugs to the threat of cyber to make it work. I have lots of stories like this one and can use any of them to make various points. The good news is that you have lots of stories, too. Using stories in your presentations makes them more interesting for the audience and more fun for you as the presenter. The next time you have a presentation to give, whether it’s at RIMS or at a company meeting, add in a story of your own to help make your point. You’ll be amazed at the feedback you get. And you’ll be thrilled down the road when someone mentions your story. I know it sounds odd, but I’m proud to be the “thousand-legger” guy!

Medical devices, such as pacemakers, insulin pumps and defibrillators, could become lethal in the hands of a hacker tampering with them remotely. A new study that shows medical devices—and patients—are vulnerable to cyber attacks is a wake-up call for manufacturers, according to a Silicon Valley software company that sponsored the study. Device manufacturers must change their culture and look at security as an equal to patient safety, says Chris Clark, principal security engineer of strategic initiatives for Mountain View, Calif.-based Synopsys. The company’s study, which surveyed about 550 employees of device manufacturers and healthcare delivery organizations (HDOs), found that nearly 70% of manufacturers and nearly 60% of HDOs believe an attack on a device built or in use by them is likely to occur during the next 12 months. The most surprising finding, Clark says, is that about 40% of manufacturers and 45% of HDOs—despite being aware of the risks—take no steps to prevent medical-device attacks. See also: How to Make Smart Devices More Secure   There are, however, some positive takeaways, he says. The study, conducted by the IT research organization Ponemon Institute, showed that “a significant percentage” of HDOs are concerned about the risk of insecure medical devices, and many are taking measures to test them for vulnerabilities. That’s a good sign, Clark says, because most study respondents work for small organizations “with limited resources and expertise in this area.” Security painfully lacking About 60% of respondents work for organizations with fewer than 1,000 employees, 10% said they had no budget for device security and 40% said their annual budget was less than $500,000. The study found that 59% of respondents employed by HDOs rated the importance of medical device security as very high relative to all other data and IT security measures deployed. Yet, only 37% of those who work for manufacturers consider such security of very high importance. A cyber attack on a medical device can manifest in various ways. This tells us the manufacturers still operate under the pretense that security is an HDO issue, and medical device security will be a lower priority for the foreseeable future, Clark says. “This statistic alone should be of great concern and a critical lesson for HDOs who are truly interested in protecting their infrastructure.” An attacker could take control of a device to administer inappropriate or harmful treatment to a patient, Clark says. The attacker could dispense the wrong dosage of medication via an infusion pump, manipulate the electrical output of a pacemaker, crash or render a device inoperable, access the data stored or transmitted by a device or use it to pivot to other systems or devices within the same network. Hospitals risk erosion of patient confidence Each of these scenarios has a physical impact to a device or group of devices, but the real danger is a loss of confidence in the ability of HDOs to deliver quality care and protect patient information, Clark says. “A breach could be catastrophic for a hospital system.” The Synopsys study found that 80% of respondents who work for medical device manufacturers or HDOs say medical devices are very difficult to secure. The top reasons cited for device vulnerability include accidental coding errors, lack of knowledge/training about secure coding practices and pressure on development teams to meet product deadlines. Security an afterthought Securing medical devices also is difficult, Clark says, because security is not a primary consideration early in the design process. “This, along with the need for flexible communications that are often unencrypted or have no security characteristics, create a wide range of challenges.” Respondents in the Synopsys study were surveyed before the WannaCry ransomware attack in May. The worldwide cyber attack targeted computers running the Microsoft Windows operating system and, within a day, reportedly infected more than 230,000 computers and medical devices in more than 150 countries. See also: Can Your Health Device Be Hacked?   Healthcare organizations are “some of the most commonly targeted cyber attack victims, second to only the banking and financial industry,” Clark says. “If you couple that trend with the results of this survey showing how little is being done to protect medical devices, it’s not unreasonable to expect things to get worse before they get better.” Most stakeholders, though, are “genuinely concerned” about the impact of insecure medical devices—“both in terms of patient safety and risk to their organizations,” Clark says. “What remains to be seen is whether the industry steps up to voluntarily address these challenges or the U.S. Food and Drug Administration takes a more aggressive stance.” This article originally appeared on ThirdCertainty. It was written by Gary Stoller.

According to McKinsey, customer satisfaction with your company has more to do with the end-to-end experience than individual touchpoints. This is important to understand, because we tend to evaluate business performance based on distinct metrics such as call handle times, quote starts or quote conversions. While each of those aspects of the customer experience is important, they provide only a snapshot of the customer’s journey and not the big picture. If McKinsey is right, it’s the picture as a whole that will influence a customer and generate their loyalty. A leading insurer, which has always placed the customer experience at the forefront of its strategy, proved this to be true as it transformed the entire customer journey with top-tier digital capabilities. Creating a Loyalty-Generating, End-to-End Experience The year was 2014, and a leading insurer that manufactured a much-sought-after auto product was meeting demands for homeowners coverage by sending leads to other carriers. Right away, this is where we begin to see that the sum of the end-to-end experience is worth more than its parts. Customers didn’t like being sent to another insurer, and, to be quite truthful, the leading insurer didn’t like sending them away. Providing a consistent customer journey across multiple insurers was difficult, and, once the customer was transferred away, the leading insurer lost the connection that encouraged satisfaction and renewals. See also: P&C Insurers: Come Out of the Dark Ages   Committed to providing every customer with the same high-quality end-to-end experience, the insurer had a thought. What if it could add homeowners coverage from a few select carriers—those that met its stringent customer experience standards—to its own auto policies, improve the efficiency of the quote-to-issue lifecycle AND still own the customer? It sounded like an impossible feat, but, as a leader in insurance innovation, the company knew it could achieve just about anything with the right help. It struck up a healthy relationship with a well-established insurtech innovator offering a leading digital distribution platform. In addition to gaining digital competence for its in-house agents, the company was able to offer product choice and bundle home coverage from other carriers with its own to improve the customer journey. Here is how the new customer experience looks:

• A customer calls the company’s internal agency for quotes on homeowners and is interested in auto insurance.
• Agents take a few pieces of information from the customer, such as name and address, enter it into the platform and let the magic begin.
• Automated capabilities draw verified data from third-party sources to complete the application. The agent receives instant pricing for various homeowner product options and an instant quote on the auto.
• The agent selects the appropriate coverage with a few clicks of the mouse and just as simply quickly binds and issues the policies.

The magic starts with a single call. The agent doesn’t need to put customers on hold to enter information into a multitude of back-office systems or tell the customer he’ll call. Nor does the agent send the customer to another agent or website. Come renewal time, the insurer works with the customer to renew both the home and the auto. It’s simplicity at its best and drastically improves the entire customer journey. What Customers Feel Customers have provided their affirmation of the new capabilities with their wallets. In 2014, as the platform was implemented, the leading insurer had only 100 agents handling a quote volume of 100,000. Customers will talk -- and, in this case, they had all good things to say as they encouraged their friends and family to call the leading insurer. By 2016, the insurer added 150 new agents as quote volumes doubled. The insurer was now providing 70% of customers with an offer and converting 35% of those to sales. In fact, sales doubled year over year. And the magic continues as the insurer sold 20,000 policies in the first quarter of this year alone. The insurer has skyrocketed to No. 5 in the list of top carriers by direct premiums written by group and has no plans to come down any time soon. See also: How to Reinvent P&C Pricing   It looks like McKinsey is right. A top-notch customer journey can make all the difference.

“Irresponsible”; “entitled”; “the gilded generation that never had it so good,." It’s fair to say that society, in general, has a pretty dim view of the group of people currently aged between 18 and 34 - collectively known as millennials or Generation Y. Among the various criticisms leveled at the young professional cohort (immature, lazy, flippant -- the list goes on), there is one theme that stands out. To quote a 2016 article from Ratesetter: "The YOLO generation is clueless about money." (Disclosure - the authors of this article are both in their 20s.) But is this criticism fair and accurate? We ask this question on the back of recent research from Aviva and others that suggests that the millennial generation might be more careful about what they spend their money on than they are given credit for. Perhaps surprisingly, the research showed that 50% of millennials categorized themselves as savers and that the average 18-to-34-year-old spends a great deal more time researching a purchase before clicking the Buy Now button than you might have thought. See also: 3 Ways to Leverage Digital Innovation   This could be as a result of a number of things - the generation grew up amid one of the toughest recessions in living memory, are increasingly saddled with student debts and are facing the ever-increasing cost of housing. According to a study carried out by Aviva, millennials typically have just £156 left each month after basic living costs and repaying student loans. Regardless of fault or cause, the research seems to suggest that the average 18-to-34-year-old has less money to spend on, well, pretty much everything. Perhaps we have a case of “we’d love to save more -- if we could.” Notwithstanding all of the above, 70% of young people in the Aviva survey indicated that their main motivation for work was to be able to afford to travel. Pair this with that generation-transcending, young person’s mindset of “it’ll never happen to me”; one starts to realize why arranging adequate non-compulsory insurance cover does not appear very high on their lists! However, with 16.2 million millennials in the U.K. alone, they now account for the largest generation in Western history, and this presents insurers with a great, significantly under-tapped market opportunity (we stop short of saying untapped, as some of the more innovative insurers have seen the light already). The only slight problem (and it’s no secret) is that many insurers struggle to effectively engage with the young. Generation Y -- technically savvy, independent, agile, synonymous with social media and the selfie -- tend to be the polar opposite of most insurance companies. Unlike companies in many other industries, insurers don’t yet appear to have worked out the magic combination required to target, convert and retain business from the young -- indeed, a recent Gallup web panel survey found that 69% of millennials said they are actively disengaged with or indifferent about their insurance provider. Enter the insurtechs, which have come to the party with all manner of technological lotions and potions, and boy are they thriving. To paraphrase Sun-Tzu, “to engage your customer, you must think like your customer.” With a better understanding (and to a certain extent, empathy) of the common problems faced by Generation Y and how to solve them, and the ability to adapt quickly to changes without the hindrance of long decision-making processes and slow turnaround times, insurtech businesses are perfectly positioned not only to tap the gold mine themselves but to help the incumbents to do so, as well. Spoiler alert: As much as we might hate to admit it, millennials are not known for their patience. In today’s world, where you can order food online in less than five minutes and book a holiday in just a few clicks, we want things now, and, where that isn't possible, we want things quickly. As members of the rental economy, we are also averse to paying for something we aren’t using. The insurtech community has risen to the challenge and responded with the creation of no-fuss insurance policies, such as MetroMile, which allows you to pay for insurance for only the miles you drive, appealing to, among others, students at university who leave their cars at home while they study. On-demand protection is also the idea behind Trov, which enables users to simply turn on and off their insurance, in a few taps, as and when they need it. This shift in approach is something that is going to become more commonplace, with more solutions to insure a generation who view insurance as a luxury required as and when, not all the time. So how do incumbent insurers compete in the increasingly digitized, by-the-minute economy? Beyond the creation of novel covers, it’s important for insurers to realize that millennials don't want to be sold to -- with so little disposable income, they want to feel as though they have made the buying decision themselves. Millennials want to feel connected to the product/service that they buy, and this starts during the purchasing journey. See also: The Mystery of the Millennial Buyer   Traditional sales methods are no longer effective in their own right. Insurance companies need to give their younger customers the tools to make purchasing insurance quick and personal -- for example, by allowing them to autofill an online quote form using their social media data from Facebook or LinkedIn (with their permission), or by helping them to understand where they might be under- (or over-) covered. Here at Digital Fineprint, our focus is on helping the insurance community to disrupt itself from the inside out. We see ourselves as digital enablers, helping the oil tanker-esque behemoths to take on the mind of a jet ski. We firmly believe that if the major players lead from the front, adapting to the shift in the market and making the whole experience simpler and faster, all the while driving transparency between their customers and themselves, then we might just see millennials spending less time taking pictures of their food and more time getting covered! Comments welcome - as long as they are 140 characters or less….

Easy question, simple answer: They don’t. The implication is that an agent "skims" 15% commission off the top, as if (1) agents STILL get 15% commission on auto insurance, (2) agents don’t do anything to earn their meager commissions (like exposure analysis, product selection, claim advocacy, etc.), and (3) GEICO has no acquisition costs like advertising, sales and service staff salaries and benefits, etc. See also: How Basis for Buying Is Changing (Part 2)   The Florida Association of Insurance Agents (FAIA), the state affiliate of the Big “I,” has a blog area where agents can comment on staff blogs. Here is an agent’s response to a recent blog post: "I certainly don’t put myself in the ranks of Warren Buffett, and we clearly have a different target client than his GEICO brand does, but it is very interesting to look at their recent financial reports. "GEICO’s recent disclosure notes that it wrote 974,000 new policies last year. Sounds like they are hitting us hard. They also spent $1,400,000,000 on advertising last year. That’s 1.4 BILLION with a 'B.' "If you do the math, that is $1,437 per policy in acquisition costs just for advertising, not including other underwriting expenses. Now remember, they have another 21 million customers on the books already. I wonder how they like subsidizing all those new policies….” So, all you agents out there, how many of you get $1,437 commission on each auto policy? If that represents less than 15% of the premium dollar, then GEICO’s average auto premium would have to be about $9,600. Of course, that 15% claim might be a little off, perhaps by 100% or more? See also: How Agents Can Tap the Gig Economy   Thirsty for more? Read my blog post from six months and a day ago.

Several well-meaning experts in this space have written about the unsustainability of usage-based insurance (UBI) programs due to high costs and low returns. They argue that, when you add up all of the acquisition, technology and administrative expenses, as well as premium discounts or other incentives, insurers would need to see a significant (read, unrealistic) decrease in loss ratios just to “break even.” I’ve seen figures as high as 25%. This line of thinking assumes that insurers are evaluating their UBI programs with the same criteria they use to evaluate any new business initiative, which is some variation of a return-on-investment (ROI) formula using future cash flow analysis and managing to a minimum required threshold set by the chief financial officer. Sound familiar? Optimally, the decrease in loss ratio will be supplemented by an increase in policyholder retention and market-share growth, which in time would allow you to manage to your ROI objective. However, by evaluating and measuring opportunity cost and leveraging other progressive metrics such as policyholder engagement, insurers struggling to grow their UBI programs should be able to get the continued support they need from executives to see their programs through to success. See also: Insurtech: How to Keep Insurance Relevant Setting UBI Up for Success The challenge with UBI is in building a large enough base of active policyholders over a long time (say, 3-plus years) to allow for meaningful measurement of the impact of loss ratio improvement. To offer perspective on this, I’m reminded of a well-made and still highly applicable argument made by Clayton Christensen nearly 10 years ago in the Harvard Business Review. His aptly titled 2008 article, “Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things,” argues that one of the most misapplied paradigms of financial decision-making relates to fixed and sunk costs. In most companies, managers are biased toward leveraging existing resources that are likely to become obsolete quickly, and therein lies the rub – the strategy group is often split from finance, when in fact the two should be fully intertwined and moving forward with the goal of ensuring the long-term competitiveness of the business. Because that’s not likely to happen any time soon in most organizations, what’s the next best alternative when you’re being challenged by your management team for continued justification of your UBI program spending? I’m going to give you a couple of ideas. First, measure the opportunity cost of not continuing to innovate and present market-validated data to back your case. You can accomplish this by researching and compiling data on future projections of declining auto premiums, shrinking demographics of traditional car buyers and rapidly increasing severity loss costs. CCC’s 2017 Crash Course report, for example, provides in-depth analysis of repair costs, telematics, casualty trends and myriad other factors that contribute to the performance of the industry. Other research you can leverage includes the success stories of national UBI market players via their annual reports, as well as recent research from analyst firms and reinsurers on the proven business impacts of telematics over time. To quote Christensen again in the above-mentioned article: “The projected value of an innovation must be assessed against a range of scenarios, the most realistic of which is often a deteriorating competitive and financial future.” I think that pretty much speaks for itself in terms of the potential value of moving your UBI program into high gear. It took less than 10 years for 95% of insurers to adopt credit-based rating variables, and there is no reason to think that the adoption of driving behavior variables via telematics should be any different. Second, focus on a shorter-term performance metric that is easy to measure and highly important on one or more long-term traditional metrics. A good candidate for this is customer engagement, measured simply as the number of times a UBI participant interacts with your mobile app or web dashboard on a monthly or weekly basis. This metric has been proven to have a direct correlation to higher retention and increased customer lifetime revenue. In fact, CCC’s case studies with its telematics customers have shown an average increase of 30% in retention rates for UBI policyholders vs. non-UBI policyholders, with consumers interacting an average of 2.4 times per month via mobile. See also: Is Usage-Based Insurance a Bubble?   To ensure continuing success in your program, you’ll want to determine which high-impact motivators are most successful in driving customer engagement. The ability to do A/B and multivariate testing in pilots or soft launches is key in helping you rapidly and effectively find which motivators are most effective for the segments you are targeting. Open telematics platforms that allow you to easily set up and administrate these types of tests via a user-friendly web interface is critical here. Furthermore, having the flexibility to rapidly test market sentiment among your agents across various segments of your business can yield greater insight and allow you to maximize your participation rates and Net Promoter Scores. By seeking out and finding valuable metrics to support traditional innovation business cases, you can help win the internal support you need to continue to scale and grow your UBI program. At the end of the day, you simply can’t afford to be anything but a  first-string player in this high-stakes game.

Recently, an article was written on ITL (and published in the Six Things newsletter) that cautioned against the use of big data to change the customer experience when applying for insurance. The article demonized eliminating or even minimizing the plethora of questions required by carriers and, instead, using data from the public domain. In making his point, the author referred to a “startup called Aviva.” Aviva, in fact, is not a startup, but a FTSE 100 company that has revenue in excess of GBP50 billion, has 30,000 employees and has been around for more than 150 years given its Norwich Union and Commercial Union lineage. The article stunned me. The author's thinking seems to be of a different era. In no way am I suggesting that efforts by the insurance community to use data from the public domain to improve customers' experience is perfect, but the premise of the article showed little understanding for the depth and complexity of information sought by insurers to evaluate and price risk, and the burdens for customers and their agents to provide that information. The article also tried to simplify a complex subject into good versus bad because of specific instances of incorrect information sourced from the public domain. The evolution in this space is far more robust and advanced than the author seemed to understand. See also: When Big Data Can Define Pricing   As society has evolved, so have the sources and accessibility of information, and so has our decision making. We don’t rely on the first return by Google on a search engine or simply get a single return on a product search when seeking a product on Amazon. The same rules apply when humans make decisions – they seek input from multiple people. Insurtechs seeking to navigate the big data domain are addressing the challenge by applying this real world behavior -- reducing the demands for customer information by understanding the context and bringing data together from a variety of sources, often with a high degree of veracity. Terrene Labs, a SaaS provider to the carrier, MGA and broker community is among the most compelling examples. Terrene has managed to reduce the 150 to 200 questions required to place a property and liability, work comp and auto cover for small business customers (the $100 billion market of companies with as  many as 100 employees and $10 million in revenue) by requiring only four pieces of data. Terrene assembles data fragments from more than 900 sources (insurance-specific, non-insurance, private data sources, etc.) to generate all the information for a completed application (as well as additional relevant risk information not sought by carriers). Terrene does not have static rules of sourcing data (despite what the author suggested) but uses machine learning and artificial intelligence to dynamically source data based on algorithms that value veracity. The results are far more impressive and the process to achieve this far more complex, than the author of the referenced article seems to understand. A powerful example that illustrates the point is determination of NAICS or SIC code, which is the basis for all carriers' risk appetite selection and the basis for pricing. Terrene’s proprietary techniques are far more accurate than the process an agent CSR typically uses to determine class of business. A customer that identifies her business as a “cabinet store, maker and installer” could be properly categorized as a NAICS classification of 337 (furniture and related product manufacturing) or a NAICS code 444190 (kitchen cabinet store). The Terrene engine can properly determine which category is appropriate with an extremely high degree of accuracy. This accuracy ensures that appropriate carriers for this risk can be identified without the risk of rejection further into the submission/quoting process, frequently a pain point and a significant source of inefficiency and yield loss. Big data, if done well, can improve the quality as compared with a customer’s self-reporting, which typically has an element of bias. For example, in a surety context, over a large sample set from one carrier, none of the customers reported prior bankruptcies. The Terrene solution, in fact, determined that 16% had a prior bankruptcy. Similarly, powerful insights into risk profile that are typically not sought by carriers can now be generated. For example, Terrene profiles characteristics in the risk that are not consistent with self-reporting of profession or trade – one recent example was a home remodeler that carried an asbestos remediation license. See also: What Industry Gets Wrong on Big Data   The evolution of big data is a work in process, so companies are taking different approaches in their journey. One such example is a company that uses the Terrene capability to pre-populate an application that then can be reviewed and affirmed by a customer before a submission is made – a process that customers report is far more effective than self-completing a 200-question set (which typically takes two-plus hours), not to mention the substantial improvement in information veracity. Unfortunately, like the article referenced at the outset, not enough positive attention is being taken to understand these powerful advancements that leaders such as Terrene can deliver now.

As the insurance industry pushes ahead into the next decade, adapting to change and, in some cases, leading change, those committed to the industry and its purpose face an underlying tension that they all wish would just go away. They wish the industry were not so hated by the public. While "hate" is a strong word and potentially offensive, insurance definitely ranks toward the bottom relative to respect when compared with other industries, products and services. In my personal quest to end this problem, I find that you can learn a lot by examining the worst of the possible behaviors—that is, insurance fraud. Recently, my colleagues at Maddock Douglas and I engaged in some conversations with both LexisNexis and Swiss Re on this subject. Both organizations have some interesting lenses to look through. In fact, the three companies will be doing a webinar to share these views on Aug. 10. See also: Happy Producers, Happy Customers   First and foremost, it was surprising to hear how big the problem of fraud actually is. LexisNexis Risk Solutions, through a variety of sources, has reported that fraud costs the insurance industry more than $80 billion a year. There are many flavors of fraud, ranging from out-and-out intent to steal money from insurance companies all the way to “little white lies.” The ability to detect and size that behavior is very helpful in creating realistic expectations around costs and isolating areas for improvement. I find the white lies more intriguing and potentially helpful in understanding the problem because they are more widespread and harder to detect. I suspect that some of that behavior stems from a lack of understanding about how insurance systems work, with consumers not necessarily realizing that “misbehaving” has a cost. Swiss Re has some interesting insights about the behavior, as well. They've leveraged behavioral economics to learn that the context, order and style in which we ask basic underwriting questions can make a big difference in the truthfulness and accuracy of answers. I believe there is yet another lens that we can put on this challenge: social norms. Insurance is a social construct; however, we treat it like a product. Social constructs—such as electricity, cable TV, public transportation, public parks, schools and community resources—are shared. The behavior of a few with respect to those shared constructs affects the many. It is the many who have responsibility for their preservation, especially when they start to break down. However, that big picture is often lost after those social constructs age way past the people who invented them. So perhaps it’s time to reinject social norms into the insurance conversation, helping the public see how their behavior affects others. Some great role models for this type of shift would be:

• The Keep America Beautiful campaign from the 1970s
• Mothers Against Drunk Driving
• Quit-smoking campaigns

On the surface, it would seem like the common denominator is a giant advertising expenditure. While that may be true, there is another common denominator we can learn from—that is, a social label. Keep America Beautiful, best known for the crying American Indian, is the campaign that also created the term “litterbug.” “Don’t be a litterbug.” Litterbugs are socially unacceptable. But, prior to the invention of that term, it was socially acceptable to dump litter at a traffic light out your car window. Mothers Against Drunk Driving (M.A.D.D.) created the concept of the designated driver. The “DD” is a hero to those who like to have a good time but want to stay safe. Quit-smoking campaigns created the concept of “secondhand smoke.” Yes, scientifically proven, but, more important, the concept brought into focus the innocent victims, often children or nonsmoking co-workers. The result was ordinances and family rules banning smoking in many locations. Is there such a social label that can be created around “little white insurance lies”? The label could cast out the villains, glorify the heroes or spotlight a victim. My colleagues and I have done a little brainstorming on this subject, and there are some interesting ideas we will talk about during the webinar. See also: How to Get Broader View of Customers   The bigger question for the industry is whether this labeling is a job for a single brand or a coalition. In my opinion, either is possible with the right passion to make a difference. While the past examples all had large ad expenditures behind them, they were all invented before the internet existed, when ad spending was the lever that brands and coalitions would pull to raise awareness. However, today we have unlimited access to technology and social connectivity. Think about the success of the Ice Bucket Challenge. This social campaign raised $115 million for ALS research in just a few months. Why? It created millions of heroes. It let people, for a moment, feel what it was like to be a victim and then do something about it, either through raising awareness or raising money. Those who didn't participate were, socially, some level of villain. After all, couldn’t you sacrifice your comfort for a few seconds, or kick in a few dollars, for a good cause? Wow. Hmmm. Do you have any thoughts about how we could create that sweet spot within insurance? If so, I would love to hear.