We’ll admit it; we were caught asleep at the wheel on this one. We had heard of Lemonade a few months ago and how it successfully raised $13 million in investor funding, but given that there are 500-plus other insurtech startups out there, we didn’t pay that close attention. Then on Sept. 21, it opened for business. Both Carly and Tony were in Hawaii for the CPCU Society Annual Meeting and entirely too busy drinking Mai Tais, err, I mean, working the event to even notice that Lemonade went live. We’re back in the lower 48 now, back at our day jobs and, after almost a month working on catching up, it just recently hit us that Lemonade is a BIG deal. A REALLY BIG DEAL. A lot of digital ink has already been spilled at ITL with at least three great articles about Lemonade, but we still needed to give our own point of view. As Insurance Nerds, we are completely geeked out, and, as millennials, we can’t help but want to move our own insurance to Lemonade and are actively wondering when the company will expand to Pennsylvania and Georgia, where we live. Lemonade is not just another insurtech startup. It is an actual, mobile-first, legacy-system-free, licensed carrier offering P2P (peer-to-peer) insurance to delighted customers in the state of New York through a seemingly magical iPhone and Android app. To start understanding what this is all about, you must watch the three short videos in this article: That first video looks like a VERY snazzy proof of concept, and it almost makes you wonder if this thing will ever go live or if it will simply be vaporware. But it’s already live! Maya, the young lady who asks you in plain English a few simple questions to “get you some great insurance” is not a call center rep in NYC, Des Moines or even in Delhi; she’s an artificial intelligence chat bot. This technology is so new that it was unknown before 2016 and is only starting to be experimented with in the high-tech industry, and it’s live on Lemonade, helping people buy homeowner’s and renter’s insurance. Notice how, as the user fills in his address, the system automatically pulls potential matching addresses, and once it has a full match it automatically displays a map to confirm. Then it asks whether you have roommates, a fire alarm or a burglar alarm, if you answer yes to any of those, the system knows what else it needs to ask. See also: Lemonade: Insurance Is Changed Forever   It immediately pulls data from databases, analyzes all the underwriting characteristics it needs and offers an incredibly cheap policy. Oh, and if you already have a policy, Lemonade will even cancel it for you and get you a refund! Coverages are shown in a simple, graphical illustration, and just tapping on a darkened icon adds that coverage to your quote immediately. Enter your credit card info, and done. The whole video takes about 40 seconds to get to a bound policy. In real life, it probably takes about 90 seconds. You even get to sign your contract right on your touchscreen. It’s downright magical. The ease of use and freedom from legacy systems by themselves are probably enough to get 70% of millennials (and many Xers and Boomers) to leave their existing insurers and go with Lemonade instead! As Michael Tempany explains, no existing insurer can produce an app like this because of our legacy systems, workforce and processes. It’s simply not possible. He even argues that “the only solution for traditional insurers wanting to compete with Lemonade is to start from scratch. In short, they need to create a company or subsidiary unencumbered by legacy systems, workforce constraints and intermediaries.” But that’s just the beginning. Rick Huckstep of the Digital Insurer is absolutely right that “This is what insurance is meant to be: mutuality in the pooling of shared risk.” He argues that “the industry has lost its way with the evolution of mass scale personal lines in the 20th century. The profit motive has gotten in the way of trust; the insured and the insurer are both chasing the same dollars. And now, their interests are no longer mutual but are misaligned. The insured wants a helping hand and to be ‘made whole.’ The insurer wants to satisfy its duty to shareholders.” This is true even with mutual companies with no shareholders; the existing model of every other insurance carrier puts the customer’s interests against the carriers interests at least to some extent. While Lemonade is a full-on risk-bearing carrier, it has eliminated the existing dilemma of every other carrier: Lemonade takes a 20% cut of the premium as a fee, and that’s it. If you have a loss, you get paid for it (immediately and without questions), and, if you don’t have losses, and your policy produces a profit, it gets donated to the charity of your choice. The claims process is also amazing. You open the app, tell it you had a claim, answer a couple of questions, sign on the screen, record a quick video explaining what happened and get paid, on the spot, immediately. Oh, and by the way, Lemonade is A-rated and reinsured by Lloyds of London. The second video explains the science that makes it all work and has a great line: “Insurance that is a social good, not a necessary evil.” This tag line is going to be killer awesome. Also, very interesting that Lemonade explicitly explains what Geico’s “15 minutes can save you 15% or more” line has always meant: There are no brokers or agents involved. Nobody explains Lemonade better than Dan Ariely, behavioral economics expert, Duke professor and Lemonade’s chief behavioral officer. “In the very structure of the old insurance industry, every dollar your insurer pays you is a dollar less for their profits. So when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin. Basically if you tried to create a system to bring out the worst in people, you would end up with one that looks a lot like the current insurance industry.” See also: It’s Time for Some Lemonade   And a fantastic commercial making it all crystal clear to the customer: Make no mistake, Lemonade will expand beyond New York, and we’d expect it to be in all 50 states within the next five to seven years at the very latest, and it will expand beyond renters and homeowners. A lot of questions remain open: Will Lemonade have decent underwriting results? Will the underwriting results even matter given the fee-based structure? Will the company be able to come up with an equally genius model for auto insurance? How about commercial insurance? A couple of things are absolutely certain: Millennials have no issue leaving legacy insurance companies and will be thrilled to try this out; and our industry has changed forever. Lemonade is what we will get compared with from now on. How will your company compete? Want to support InsNerds? InsNerds is free, it's a labor of love and it takes a lot of time. We have a ton of fun doing it, and we would really appreciate your support in keeping it running. If you've been helped by one of our articles, if we've helped you grow in your career, if you agree that our content is improving the insurance industry and that we are unique in what we do, please consider donating. We’ll use your donation to deliver even more career- and industry-changing content, and to spread the word about that content far and wide in the Insurance Industry.

Five years ago, insurance-focused technology conferences were attended mostly by insurance carriers and large consulting firms. Now, I’m amazed and encouraged at both the size of the audiences and the diversity of the audiences – a melting pot of venture firms and eager entrepreneurs, as well as all the traditional industry folk. “Insurtech” is starting to get some serious attention, and for good reason. There are new funding announcements every couple weeks, new conferences popping up left and right and corporate venture funds now at almost all major carriers. The funding in this space alone has risen from $740 million in 2014 to $2.65 billion in 2015, and as a category insurance tech has seen 50% more deal activity in 2016 year to date than in all of 2015 combined. As Peter Thiel has said, “Humans are distinguished from other species by our ability to work miracles. We call these miracles technology.” We’ve seen technology revolutionize other industries, and now it’s our time. Our industry has been here before, and, every time, new companies have emerged while incumbents have suffered. Technology has cycled through the industry many times, each time weeding out the latent and rewarding the agile. What’s different this time is the pace of change – winners will become losers faster than we’ve ever seen. This time, three forces will significantly affect the personal lines insurance industry: shifts in consumer purchasing behavior, the proliferation of data and the interplay between data and consumers. The mobile-first era Technology makes life easier for consumers, and we’ve seen a shift in behaviors because of it (or is it the other way around?). Regardless, as a result of this shift, mobile is the fastest-growing retail channel, and “one click” ordering has become the standard. See also: Blockchain Technology and Insurance   Unfortunately, as an industry, we are far behind. The industry standard still touts a 15-minute purchasing experience as a win – on a computer. Despite the inherent value of convenience, the mobile experience is far more tenuous for consumers than other distribution channels across all major competitors. Consumers are asked to enter in form field after form field designed for a desktop, but on a mobile device and with only two thumbs. The result is a digital experience that ranks worse than government services. We’ve seen this trend before. The internet had a very similar effect on our industry in the late '90s and early 2000s and continues today. With the exception of Progressive, Geico and USAA, most large carriers still struggle to understand how to compete in an internet-first world. These three companies successfully cornered the market by embracing the internet while the rest of the industry doubled down on the spiraling agent-model. It’s clear that we’re trending toward the same pattern with mobile. Today, it’s a relatively level playing field. Those who support a mobile-first experience will win big. Those who are late to the game won’t ever catch up. Open the data floodgate The rise of mobile means access to new data, and new data is paramount for our industry. A fundamental value that insurance companies provide to the economy is the ability to price and understand risk. Data is essential to this understanding. As Seth Lloyd of MIT says, humans used to be hunters and gatherers of data. With technology, data is now flying by us every second, and the real challenge is successfully understanding how to capture, sort and use this data. Smart mathematicians and engineers have already figured this out to a large extent, creating supercomputers able to do machine learning mathematics on large quantities of data, producing insights never before seen. However, despite the accessibility of these improved techniques, most actuarial modeling is still based in classical statistics and generalized linear modeling. The interactions: data + consumer These two trends -- the customer move to mobile first, and the proliferation of data -- are difficult to manage alone. When combined, the interaction becomes disproportionately challenging. This has created an environment where the industry has largely pegged new data collection against consumer experience, rather than executing on both simultaneously. For example, telematics through OBD II programs have been major efforts of the industry. The reality is these devices are confusing for consumers, the value proposition to them is meager and the process of receiving the device, plugging in the device and returning the device is starkly arduous in contrast to modern consumer purchasing experience expectations. Smartphones can now do everything an OBD II device can, and, with connected cars, these OBD II devices are completely obsolete. The question is whether carriers will continue to throw good money after bad, or realize the sunk cost of OBD II programs and begin investing in new technologies. See also: Insurtech: One More Sign of Renaissance   And it’s not that the industry isn’t spending money on IT – it is. Armies of engineers working on old technologies are provided with hundreds of millions of dollars to attempt to overhaul policy management systems. Billion dollar companies specializing in just fixing policy management systems exist, capitalizing on the inability and incompetence of the industry. The dawning of insurance tech The industry has for too long mistreated technology, looking at it as a cost of doing business, rather than an investment in consumer experience and better data management. It is rare, if ever, that you see a seasoned engineer in the C-suite at an insurance company or even on the board. Talented engineers run from the industry. Can you blame them? The agile engineer, eager, stumbles into a lagging and latent system. It’s almost the start of a bad joke. The result is that all of these implications and their interactions with one another have cost consumers dearly. The purchasing experience is confusing and onerous. The price is unfair, based off the same data as 20 years ago and off out-of-date statistical modeling. Consumers are paying for an inefficient system. This is clear to the venture community, and clear to many entrepreneurs. The industry has been protected by regulation, capital and complexity. These barriers may have slowed the pace, but, increasingly, we are seeing startups that are not partnering with existing carriers, but becoming carriers. This is the beginning of a new end for car insurance. Technology will continue to create miracles, and these miracles will belong to the consumer.

At the 2016 PCI Annual Meeting, a panel of retiring insurance executives discussed lessons learned over their careers. The panel comprised:

• Marguerite Tortorello – moderator
• Terrance Cavanaugh – president and CEO – Erie Insurance Group
• Kenneth Ciak – vice chairman – Ameriprise Auto & Home Insurance
• Tad Montross – retired CEO – Gen Re
• J. Douglas Robinson – chairman – Utica National Insurance Group

What keeps you up at night, then and now?

• The Weather Channel!
• Making sure that we are achieving responsible growth for our shareholders.
• The emerging risk trend that had not yet been identified.
• Worrying is one step. As CEO, you need to do something about the things that cause you worry.
• The dramatic change our economy is undergoing and the impact it will have on our industry.
• As CEO, everything keeps you awake.

See also: Blending the New With the Old Where do you think the culture of the insurance industry should be moving?

• Our industry used to be very sleepy and stagnant. Over time, we are seeing more specialization, which allows for better expertise. We need to continue to attract better and smarter new talent into our industry. Our industry needs to do a better job explaining the role insurance has in the economy and all the good things we do.
• The question is – how much of the change we are seeing right now is cyclical versus permanent? How companies respond to this is important to their future direction. Companies are more intelligent now because of underwriting and claims models. We need to be cautious about becoming overly dependent on these models.
• Is your business culture an accelerator or an inhibitor to future business. Going forward, we need to focus more on service instead of just the protection that we offer. Our clients expect us to be more proactive.
• There is more emphasis on “work-life” balance, but this may have gone too far. New employees want to work less but be rewarded more. Our clients expect 24-7 service, which conflicts with our employees' desire for less time at work.

What types of traits do executives need to look for in their management team to lead into the future?

• You want people who are curious and will challenge the status quo. We cannot be overly dependent on what we have done in the past to make decisions about the future.
• Leadership needs to have a clear vision about their long-term goals and not get distracted by short-term issues.
• Leaders need to show their employees they care about them and that we relate to them. Our customers want the same thing.

How do you see the industry better marketing itself to millennials to attract new talent?

• We need to emphasize the vast variety of tasks we perform and jobs available in our industry.
• Stressing the “service” aspect of our industry versus just paying claims. We help people at a time of need.
• We are an industry that is under attack at the state and federal levels. We need to do a much better job talking about the good things we do for society and the key role our industry plays in preserving the economy.
• Everyone uses insurance products, but few actually understand the insurance products. The industry needs to do a better job explaining what we do and why it is so important. We need people to view insurance as an investment in protection instead of just an expense.

How will technology affect our industry in the future?

• Consumers want instantaneous service, and we need to be able to deliver it.
• We still deliver paper policies, so we have a long way to go in the technology area.
• It is important to balance technology changes with regulatory requirements.
• Technology is affecting almost every risk we underwrite. Industry leadership needs to pay attention to these changes so they make sure they are evaluating the risk correctly.
• We probably have made more mistakes with technology innovation than other industries due to the significant amount of historical data we are dependent on. On the flip side, we may become better at evaluating risk than public policy wants us to be as certain segments may become uninsurable with better data and analysis.

What are your concerns around the regulatory environment?

• This is a huge issue. Not only are regulators wanting to regulate how we do the business of insurance, but they are also wanting to regulate what we invest in, who we promote, how we compensate people and the makeup of our boards. At some point, we have to run a business.
• The constant change of regulations creates so many challenges. For example, after Hurricane Sandy states, put out new regulations to govern how companies handled claims on in-force policies.

See also: Are You Ready for the New Paradigm?   What regulatory impact do you think the pending elections will have?

• Historically, the party in the White House has not had a significant impact on the financial markets.
• We are already seeing so much regulation on our industry, it is hard to get much worse.
• There is concern that politicians will not like the answers that our data gives us with regard to rates and coverage limitations.
• The sharing economy is going to have a big impact on our industry. The state elections and how they are viewing this could have a significant impact.
• The concern is that one party may control the presidency, House and Senate, which would not be best for consumers or our industry as it would allow that party to unilaterally advance their agenda.

How do you see the distribution model changing?

• We have seen significant consolidation on the brokerage side, and this will continue.
• We are likely to see more direct-to-consumer products, which is what consumers are requesting.
• There needs to be a way to allow consumers to have flexibility and still involve the agent or broker in the transaction.

What is one thing you wish you knew then that you know now?

• I wish we had made bigger investments in technology earlier rather than constantly trying to modify legacy systems.
• Be mindful of your body language and demeanor as people pay close attention to this when listening to your message.
• It is so important to have the right people in the right place. Intellectual capital still drives everything.
• Don’t be afraid to make decisions. Too many let indecision inhibit them.
• My greatest fear was that I would hire the wrong people for the job. We eventually developed better tools to assist in that, and I wish they had been available earlier.

There is little in the world of insurtech happening today that insurers couldn’t arguably choose to do for themselves if they were motivated to do it. They have the capital to invest. They have resources and could hire to fill gaps in any new capabilities required. They understand the market and know how to move with the trends. And yet insurers readily engage with the startup community to do the things that arguably they could do for themselves.  Why is that? In Making the Most of the Innovation Ecosystem, Mike Fitzgerald observes the main cultural differences between insurers and the startups they court. These differences give us a strong clue as to why insurers engage with startups, even though on paper they do not and should not need them. Alongside these deep cultural differences, I believe that there is another angle worth exploring to help answer the question. That’s the market’s maturity stage and, with it, the strategies required to succeed. One model that helps explain this relates to the work of Abernathy and Utterback on dynamic innovation and the concept of the "dominant design." To accept the argument, you first need to believe that we’re on the cusp of a shift from an old world view of the industry based on a well-understood and stable design toward one where substantial parts of the insurance proposition and value network are up for grabs. You also need to believe that, for a period at least, these two (or more) worlds will co-exist. See also: Insurtech Has Found Right Question to Ask   So, here’s a quick overview of the model (in case you’re not familiar with it)… Settling on a 'dominant design' First introduced way back in the mid-1970s and based on empirical research (famously using conformance toward the QWERTY keyboard as an example), Abernathy and Utterback observed that when a market (or specifically a technology within a market) is new, there first exists a period of fluidity where creativity and product innovation flourishes. During this period, huge variation in approaches and product designs can co-exist as different players in the market experiment with what works and what does not. In this early, "fluid" stage, a market is typically small, and dominated by enthusiasts and early adopters. Over time, a dominant design begins to emerge as concepts become better understood and demand for a certain style of product proves to be more successful than others. Here, within an insurance context, you'd expect to see high levels of change and a preference for self-built IT systems to control and lower the cost of experimentation. Once the dominant design has been established, competition increases and market activity switches from product innovation to process innovation – as each firm scrambles to find higher-quality and more efficient ways to scale to capture a greater market share. This is the "transitionary" stage. Finally, in the "specific" stage, competitive rivalry intensifies, spurred on by new entrants emulating the dominant design; incremental innovation takes hold; and a successful growth (or survival) strategy switches to one that either follows a niche or low-cost commodity path. Within an insurance context, outsourcing and standardization on enterprise systems are likely to dominate discussions. Applying the ‘dominant design’ concept to the world of insurance and insurtech Building on the co-existence assumption made earlier, within the world of insurtech today there are broadly (and crudely) two types of firms: (1) those focused on a complete proposition rethink (such as Trov, Slice and Lemonade); and (2) those focused on B2B enablement (such as Everledger, Quantemplate and RightIndem). The former reside in the "fluid" stage (where the new dominant design for the industry has not yet been set and still may fail) and the latter in the "transitionary" stage (where the dominant design is known, but there are just better ways to do it).

Historically, many insurance companies spent so little time thinking of customers as flesh-and-blood people and were so limited by their information systems that they referred to customers as policy numbers. But insurers are developing much fuller pictures of their customers for two reasons: because they have to, and because they can. The change will provide major benefits. The “have to” part of the equation comes because customers’ perceptions are changing and their demands on companies are increasing. Amazon lets whole families track all their purchases in one place and makes smart recommendations for possible purchases, based on purchase histories. Why shouldn’t insurers? Facebook knows so much about users that it can guess when you’re thinking of buying something and put a link to, say, a couch in front of you when you move into a new place and somehow indicate you’re in the market for furniture. Why can’t insurers be that smart and sensitive? In general, the group known as GAFA – for Google, Amazon, Facebook and Apple – has provided such a good customer experience and has so shaped our daily activities that every other company is increasingly held to their standards. That’s true even for insurers, which have always felt they were just being compared against each other and which have had to change little about their basic approach since Edward Lloyd set up his coffee shop near the wharves of London in 1688 and began facilitating the writing of insurance contracts for ocean voyages. The “because they can” part of the change comes through a concept known as Customer 360 that is taking hold in the industry. The approach relies on advancements in technology that knit together existing systems, which have traditionally been managed as independent silos. As part of the change, companies like Saama pull together all kinds of data – both structured and unstructured – and cover all aspects of the customer and of the customer experience. See also: How to Bottle Great Customer Experience Customer 360 provides so much fuller a view of customers that it produces four clear benefits:

1. Rates for customer acquisition increase because analytics allow for more targeting and personalization. At the same time, customer acquisition costs decline.
2. The customer experience improves, which both reduces customer churn and creates opportunities with potential new customers as Net Promote Scores climb.
3. Opportunities to cross-sell and up-sell arise. As a result, key metrics improve, including share of wallet, policy premium revenue and multiline penetration.
4. Insights about the competition and the market increase, because you know more about what rivals are doing and how customers are responding.

The analytics involved in Customer 360 may also let you push the data and produce additional uses and insights. If a hurricane is approaching Louisiana or a tornado appears in Texas, you can advise clients on how to prepare and then how to get quick service if they need to file a claim — the claims process becomes faster for customers, in any case, because once you have a few claims filed about a storm you no longer need to gather the basic information about it. Customer 360 works by understanding a full household, rather than treating each member as an individual. The approach then pulls together data in six areas that historically have been hard to coordinate:

1. Products, whether personal lines such as auto, homeowners and life or whether commercial lines.
2. Preference management. Does the customer want to be contacted by phone or email? Do those preferences vary based on where the customer is in the process (billing, claims, etc.)
3. Interaction management. Have you contacted someone with marketing materials, phone, etc.? Have you detected some activity on social media? Has something changed about a customer’s credit?
4. Life events and decision management. Does government data tell you something new about a customer? Does a change in age suggest a new course with a prospect?
5. Extended data. What can you learn from Lexis-Nexis, from the census, from other third parties?
6. Performance management. How can you keep improving your understanding of the customer and grow your relationship?

Right now, most insurance companies aren’t actually sure who the customer is. The company knows who the agent is and works with the agent to make sure the customer gets the kind of customer he wants, but most of the data they have is on the agent. With Customer 360, if someone’s history suggests she is looking into baby names or includes an Instagram post about being pregnant, you know it’s time to offer them life insurance policy options. Someone starts looking at houses? Time to offer new house insurance. And so on. With Customer 360, insurers have a dashboard on the customer that looks like this: All policies are grouped together, even if they are in different names in a household or at different addresses – no more trying to sell a policy to a husband that the family already has one in the wife’s name, for instance. Preferences are there to be seen, meaning an agent won’t do something that annoys a customer. All interactions are logged in one place. And analytics generate insights that suggest opportunities for up-selling or cross-selling. See also: Want to Enhance Your Customer Experience?   While the sort of integration required for Customer 360 used to take as long as five years, many of these projects can now be tackled in seven or eight months. The speed comes partly because we begin with 70% of the components for Customer 360 pre-built; the client builds its competitive advantage with the final 30%. Recently, for instance, Saama helped integrate more than 15 legacy systems, automated data ingestion, integration and integrity checks and added a role-based, secure dashboard with new key performance indicators (KPIs) and self-service capability for end users. In all, more than 20 years of data was loaded into the model. Many insurance companies have talked about Customer 360-type integration for a while, yet they’re still missing out on the opportunity. With this approach, it’s possible for companies to have a broader view of their customers than ever before. And that only means good things both for customer satisfaction and for a company’s bottom line.

Mutual companies, which are operated for the benefit of their member-owners and are not controlled by outside investors, have been experiencing a moderate period of growth following the recent financial crisis as policyholders have retreated from stock-owned institutions. Mutuals’ share of the world insurance market increased from about 24% in 2007 to a little more than 26% in 2014. Their share was much higher in the late 1980s and early 1990s, before a surge of de-mutualizations in a number of developed countries took place. One of the challenges facing mutuals is new, risk-based regulatory capital standards and the introduction of tougher corporate governance arrangements that are designed to boost the resilience of individual insurers and curb excessive risk-taking. The requirements could put some mutuals at a competitive disadvantage. However, the biggest challenge to mutuals comes from digital technology, which is profoundly changing the competitive environment for all insurers. Existing mutual insurers recognize the need to innovate, and some are on the front lines of change, promoting digitalization in all areas of operations. Some smaller, more traditional mutuals, however, still remain slow to adapt. The growing development of peer-to-peer (P2P) insurance platforms, which enable individuals to share risks among themselves in much the same way that affinity-based mutual insurers do, has also had an impact. Find the full report here.

In 2014, I collaborated with EY to develop Russia's first risk management business game. It was great fun, and as a result we created a pretty sophisticated business simulation. Participants were split into teams of 10, each person receiving a game card that describes a role (CEO, CFO, risk manager, internal auditor, etc.). At the start of the game, teams must choose one of four industry sectors (telecom, oil and gas, energy or retail) and name their company. The game consists of four rounds, in each of which teams must make risk based decisions. Each decision has a cost associated with it and a number of possible outcomes. Teams must analyze and document the risks inherent in each decision they make. The riskier the decision, the higher the probability of adverse outcome. At the end of each round, a computer simulation model chooses a scenario, and the outcome is announced to each team. The aim of the game is to increase the company valuation by properly weighing risks and making balanced business decisions. The winning team is the one that increased its company's value the most after four rounds. This game was successfully played by participants at two risk management conferences as well as postgraduate students at the Moscow Institute of Physics and Technology. See also: Can Risk Management Even Be Effective?   More information about first game is available here. Let me know if your company is interested in sponsoring the translation and running the game in English. Risk management business game 2015 In 2015, I started working with Palisade to develop something a little different. Just like in the previous version of the game, the participants were split up into teams of 10. However, the game mechanics have changed substantially. Each player still receives a card describing a role, but this time the card provides a complete history of the character's role within the company and assigns each player a unique secret mission. The aim of the game is to successfully complete a merger between a large holding company and an innovative startup. The game, as before, consists of four rounds. The first round involves performing a risk assessment of the target company. Each team must identify 10 significant risks using only the information provided on the cards. The second, third and fourth rounds are dedicated to the management of these risks. Each identified risk has between 5 and 10 possible mitigation strategies that can be selected by the team. Each team has a limited budget dedicated to risk mitigation, and each mitigation action has a cost. The effects of each mitigation action selected by the teams was modeled using Palisade@Risk to determine whether it increases or decreases the value of the target company. The winning team is the one that increases the value of the target company more than the others and is then able to complete the merger. More information is available here. Let me know if your company is interested in sponsoring the translation and running the game in English. Risk management business game 2015 (online version) With the help of eNano, we went even further and produced an interactive risk management business game (only available in Russian). This game combined an e-learning course and an interactive business simulator. Each participant takes on the role of general manager of one of three innovative companies. They then receive tasks that need to be completed throughout the e-learning course:

• First, each participant needs to conduct interviews with all colleagues to identify and document risks;
• Then he needs to evaluate risks using the information presented. Note that, just like in real world, most of the information presented is biased;
• Then he needs make difficult decisions relating to risk mitigation given a limited budget;
• During the last step, participants need to develop an action plan designed to improve risk culture.

All of these steps increase or decrease the company valuation. You can find out more about this course here. Risk management game 2016 This game is the result of collaboration among Risk-academy, Palisade, Institute for Strategic Risk Analysis (ISAR) and Deloitte. Together we have created an amazing business game to teach non-financial management and staff how to perform risk modeling on day-to-day management decisions. Participants will have to play a role of an aircraft engine manufacturing company. Each team has prepared a business case for a multimillion-dollar plant modernization. Unfortunately, the project plan have just been rejected by the board, so teams only have a couple of hours to conduct in-depth risk analysis and present an updated business case to the board. See also: Risk Management, in Plain English   The game is focused on risk modeling, requiring participants to identify and validate management assumptions, identify relevant risks, establish ranges and select possible distributions for each assumption, perform Monte Carlo simulation using Palisade@Risk and present the final results. All this has to be performed in limited time and with incomplete information... just like in real life. And just to add a little bit of drama, like in real life participants have to deal with unexpected "black swans" during the game. The aim of the game is to prepare risk analysis for a multimillion-plant modernization investment project. The team with the highest risk-adjusted rate of return wins. This game has also become one of the modules in the risk management training ran by ISAR; more information is available here. Due to lots of positive comments, the latest risk modeling game is now available in English here. What's next? The latest game was both hard and entertaining, so we began talks with our partners to turn it into an online risk quantification championship. The games will require online registration, have downloadable content and require proper risk modeling. Championships will run once a quarter, and winners will receive wonderful prizes.

Video footage from dashcams or from cell phones that use driver assistance apps are becoming standard today. Some insurance companies are accepting dashcam footage as part of the claims process or are offering incentives (such as reduced premiums) to those who agree to install a black box or share their video feed.  According to the British Insurers Brokers’ Association (BIBA), there is already a fivefold increase in the involvement of vehicle black box technology during in-vehicle insurance policies. If we judge by the increase in software companies offering video-based products specifically for the insurance industry, it is safe to say video is proliferating in the customer service and property evaluation aspects of insurance, too. We anticipate this trend to grow even more in the years to come. This growth will almost certainly culminate in video becoming a standard for the insurance industry. The introduction of video opens a door to some amazing and innovative technological advancements. Video is not only the best channel for conducting communication with millennials, it is also a rich source of critical benchmarking information for unlocking opportunities, innovative customer service and practical applications. We can use video to build efficient workflows and back claims processes with accurate and factual evidence to increase response time and improve performance. See also: FinTech: Epicenter of Disruption (Part 1)   Vehicle insurance is a great example of the impact video can have on the insurance industry. Just a superficial look shows there is an infinite amount of information regarding your vehicle that is out there — be it from your own dashcam or cell phone, other call phones, CCTV, traffic cameras or home security cameras. Video is everywhere, and that is not all. There are some really interesting technologies that can analyze driver video footage when combined with real-time data retrieved from the vehicle’s own board computer (such as available via standard OBD2 connectors). These tools can show the average speed the driver is going and profile driving habits, such as keeping a safe distance, observing the speed limit, the times of day the driver is more (or less) active — and more. All this information can be compiled to provide an accurate and personalized analysis of driving and behavior patterns. By centrally collecting all your video-based information, you gain the ability to combine several technologies that augment video input and provide a better all-around picture. Let’s face it: With the volume of business the insurance industry has, the way you manage your video must be able to perform and grow at the same capacity — while also complying with privacy laws and managing complex content access control policies. Once video is collected, we also gain the video’s metadata consisting of additional information such as date and time. With this information, we can start augmenting our understanding of the video. We can use GPS to cross reference the driver’s location. Include weather tracking software to assess the impact of external driving conditions and combine this information to calculate the effect these conditions have on the driver’s ability to drive safely. We can use social media to understand specific road conditions for specific times and places, such as using GEO tracing for Twitter to monitor real-time complaints from drivers in a specific location at any given time. With all this information integrated and overlaid on top of video (either recorded or in real-time from the field), insurers are able to significantly increase incident processing accuracy and, over time, construct personalized profiles that can result in reduced policy costs and more efficient claim processing. For example, insurers can initiate a probation process for new drivers where a certified mobile app is installed on their phones to be mounted on top of the vehicle’s dashboard. The app will record the drivers' behavior overlaid with car data (such as taken from OBD2 or calculated from the video) and, after a set period of time, calculate insurance plan premiums based on personalized driving habits and issue feedback to the drivers. It would be interesting to see this kind of methodology implemented as a standard for all drivers and use the conclusions collected from all video and other complementary information to create a number-based score for drivers that indicates their objective risk. See also: Connected Vehicles Can Improve Claims   Apart from establishing driver ranking, there is so much more out there that can be funneled to help evaluate drivers, driving techniques, road conditions, vehicle performance and incidents. We are already starting to see sprouts of innovation making use of video that can ultimately improve insurance and the driving safety all around, from startups like DrivingBuddy and Nexar that aim to improve driver safety with real-time video feed analysis of driver activity to government and police initiatives aiming to crowd source driving and parking violation reports.

The rule is straightforward: “If a party requests that a defendant provide a computer printout of benefits paid, within twenty (20) days, the defendant shall provide the requesting party with a current computer printout of benefits paid. The printout shall include the date and amount of each payment of temporary disability indemnity, permanent disability indemnity and vocational rehabilitation maintenance allowance, and the period covered by each payment, and the date, payee, and amount of each payment for medical treatment.... A defendant that has paid benefits shall have a current computer printout of benefits paid available for inspection at every mandatory settlement conference.” — California Code of Regulations Title 8 §10607. The benefits printout is the foundation of every workers' comp claim evaluation. Yet, workers' comp professionals often ignore the basic exercise of examining claim expenditures. Attorneys sometimes come to mediation with a rolling cart holding boxes of documents. But when asked for the printout, they have to contact their office or the adjuster. Stranger still are the answers I sometimes get to the question, "How did you get to that number?” When I ask participants how they formulated their demand or offer, their answers may have no relation to actual claim exposure. See also: How Should Workers’ Compensation Evolve?   Showing up at a mediation or mandatory settlement conference without having scrutinized the printout numbers is inefficient and maybe even sloppy. Better practice is to obtain the printout in advance and create projections to support your claim evaluation. Workers' comp professionals should review past medical expenses to project future expenses. Of course, parties may disagree about what expenses are reasonable and the likelihood and duration of future care. A medical recommendation for a new treatment (which may be disputed) can skew the numbers. For example, resolution of one mediated case hinged on a medical recommendation for a newly available prosthetic device. The printout is also critical to resolving retro and overpayment disputes. When parties disagree about whether payments in a given period should have been paid at the permanent disability (PD) or temporary disability (TD) rate, the printout is the best evidence of what was actually paid. See also: 25 Axioms Of Medical Care In The Workers Compensation System   When both sides look at the printout together, they can often resolve their disagreements with a little help from a mediator.

When you Google Jeopardy! and insurance, you get 855,000 hits, including a range of Jeopardy! games developed to help educate people about insurance. At Majesco’s recent customer conference, Convergence 2016, we developed a Jeopardy! session with insurance industry analysts Karlyn Carnahan of Celent, Martina Conlon of Novarica and Karen Furtado of Strategy Meets Action around the concept of the insurance renaissance and the top predictions for 2017. The focus was to discuss what we see unfolding in 2017 regarding competition, technology, innovation, new products and services, as well as what will emerge as the hot areas of focus for insurance in 2017. It was an engaging, provocative and intriguing set of topics that underscore the pace and level of change and disruption within the industry…as a new renaissance in insurance. There were six areas of focus with four topics. Here are the highlights that you, as industry leaders should be assessing or even acting on. Core Systems Core systems are table stakes in today’s changing marketplace. There will be continued investment, and a major shift to cloud with agile, quick, ready-to-launch platforms is gaining momentum. In addition, some insurers are starting with a new company, new business rather than legacy replacement to rapidly enter new markets or introduce new products … breaking from the traditional path over the last 10 years of legacy transformation. See also: Insurtech: One More Sign of Renaissance   As a part of the shift, core systems must support new products and capabilities such as collaborative services where agents and customers have more transactional transparency and control from quoting and payments to claims. Products will move from indemnification-only to include embedded services and behavior-based to eliminate or reduce risk and claims. Two key predictions about what could shake the market: There may be an introduction of an entirely block-chain-based policy based on multiple simple block chain conditions; and there could be a “zero-day” cyber security exploit, where a hacker spots a flaw before it can be patched and puts insurers on notice that cyber-liability is a potential catastrophic exposure. Digital and Customer Experience Increased investment will continue in portals, but a shift in focus will gain momentum in 2017. Digital transformation will rapidly move beyond point portal solutions to multi-channel/omni-channel experiences with expanded use of alternative channels, mobile and more. At the core of this shift is transforming the customer experience to drive engagement and not just transactional capabilities. This will require a shift from data entry (with a nice user interface, or UX) to high-value engagement platforms that do much more than transactions. This will, in turn, lead to a micro-segmentation focus for customer experience. Increasingly, customers and agents will lose patience with outdated, bad UX and will shift to those who have superior UX. A look at the UX for Lemonade, Haven Life and Slice will give insurers a sense of a modern, intuitive and engaging experience. These companies and other similar organizations are much more than slick portals. They are adept at leveraging micro segmentation, new sources of data, behavioral science, gamification and much more to create an engagement experience instead of a slick transaction experience. Data Data and analytics will become more operationalized and embedded in the underwriting and claims business processes. We will see the expansion of data-driven insurance pricing and automated underwriting into more commercial lines — with a further blurring of processes for personal and small commercial. “Real time” will become full time. Expanded use of third-party data such as live weather data, IoT data, live stream video, drone video, social media and more will be used to make real-time decisions from underwriting through claims. Real time comes to life! See also: A Renaissance, or Just Upheaval?   Machine learning and cognitive technologies are beginning to emerge and gain momentum. This is driven by an array of new insurtech startups, as well as established companies like IBM that are rapidly operationalizing this technology into specific business use cases that add tremendous value…from customer engagement to organizational knowledge. Distribution The landscape of distribution will shift and expand. Significant insurtech investment is currently around distribution, and we will see the impact of technology, integration and connectivity with new channels, the rise of MGAs and the emergence of hybrid distribution models that will continue to disrupt and displace traditional distribution models. The rise of MGAs is of significant note in that they will piece together partners and technology to identify new market segments and new products to meet emerging needs rapidly…with analytics and cloud powering their rise. Google is also ready to get back into the insurance game, having learned from its past efforts. This time, Google will embed predicted premiums into search results, like it does for hotel room costs today. The insurance industry will “freak out” again, but Google's efforts will help drive business. Disruption and Emerging Tech One of the key factors disrupting insurance is the rapid inception and maturation of emerging technologies that have caught many in the industry (insurers, agents and solution providers) off guard. Just look at cloud — now a major deployment choice for core systems. Other technologies are rapidly accelerating in adoption. Telematics will accelerate in adoption across a wider spectrum of insurers for both personal auto and commercial fleets, due to both embedded capabilities within new vehicles and new solutions that offer the same capabilities inexpensively. Telematics data will grow beyond auto telematics to IoT/sensor data for homes, commercial buildings, worksites and more. This will exponentially accelerate and provide “real” proof points on the value and impact for insurance. In addition, we will see the expanded use of live stream video from phones and drones, gamification, autonomous vehicles and more. All of this will drive insurers to begin investing and partnering with services-oriented organizations and startups that can provide risk avoidance or mitigation, whether it is offering safety advice, services that detect potential risk like water heater malfunctions, car engine checkups, worksite safety and more. The industry will start pivoting toward risk management services that will avoid or mitigate high claims and provide an opportunity for new products, revenues and most importantly customer engagement and value. Insurtech Insurtech as a movement will remain sizzling hot! Significant capital will continue to enter the market for insurance startups — from insurers and MGAs to technology providers. While insurtech has the feeling of the “dot com” era…this time it has substance with real business plans, real markets and real solutions. The insurtech movement is sending a clear message to the insurance industry that we have rapidly entered a new era that is more profound than in the past…a renaissance. And insurtech has signaled that, from here forward, insurance must be innovating. But many insurers will struggle with how to innovate, what to innovate, where to start and how to engage the insurtech movement. It will require a leap of faith to begin somewhere with innovation and to determine how to deal with technology startups and work through the “noise.” It requires a shift in insurers' participation…from their partners to venture funds, accelerators and more. For some, having a strategic partner that can bring those opportunities to the table might be the best option. For others, direct involvement will make more sense. See also: The Insurance Renaissance, Part 5   And yes, many of the hot, highly funded insurtech startups might “flame out,” but they will teach the industry a thing or two about meeting customer expectations and needs. Sitting back and thinking “this too will pass” is not an option, because it will not pass. It will just morph as it rapidly disrupts, deconstructs and redefines the industry. Yes, 2017 will likely be an interesting year for the insurance industry. The definition of jeopardy is “exposure to or imminence of death, loss, or injury.” Those who do not keep track of the changing landscape of people, technology and market boundaries are in jeopardy. They will expose their companies to potential loss, injury…and in some cases the death of a business. We at Majesco see it as an exciting time for the industry…a time of great change, challenges and opportunities. While insurers have different strategies and paths to their future, we are convinced that the predictions for 2017 will be a big part of that future.