You might want to take a mental snapshot of what insurance looks like, because children born today could make up the first generation that won’t know what insurance is. That’s not because insurance won’t be a thing; it will just look a lot different in 20 years. “Insurance will be much bigger, and there will probably be more — because there will be many more risks,” said SAP Global Head of Insurance Bob Cummings on Thursday during his keynote at the SAP Digital Insurance Innovation Summit near San Francisco. Cummings realized this as he imagined how much technology would change by the time his niece’s newborn daughter, Aliénor, reaches the age of 21. By then, Cummings predicts vendors might only sell insurance when it’s packaged together with other services. Bundle Up for Protection ADT Security Services and insurance provider State Farm have already paired up to safeguard customers against burglary, flooding, fire and more. The same protection package is available from each company’s website, with a single app to control it all. And more technological improvements for Aliénor and her cohorts are sure to follow over the next two decades. “The company at that time will probably tell her, ‘We’re so convinced of our burglary protection that, if you do get burgled and we don’t manage to stop the burglar, we’ll pay you up to $200,000,’” Cummings said. “And the RFID tags and batteries will be so advanced that there will even be theft protection for where her things go.” See also: Not Your Father’s Insurance Industry   Customers of the new insurance company Tr­­­ōv can already protect their valuables by turning coverage on and off of individual items whenever they like via their mobile device, as demonstrated in a video Cummings shared during his keynote. Users can also file loss or damage claims simply by answering a few questions on the mobile app. Staying a Step Ahead This kind of industry fluidity, in which different organizations join forces to offer something greater than the sum of their parts, also happens right now with data. Applications currently available to insurance companies can combine historic customer data with real-time insights, such as a person's online searches for a car or home. “This is all very relevant, very time-critical information because, by the time he actually contacts us, he will have done a lot of comparisons,” said SAP’s Roland Bloesch at the summit Thursday. “And if we can engage with the customer before that — earlier in the customer journey — we will be able to talk about the price and value-added services.” This bundling of different data is also critical for predictive analytics, which can forecast the customer’s next priorities, according to Bloesch, SAP’s insurance customer engagement head. Brokers, agents and advisers can use that information for active outreach instead of just waiting for the customer to call. Digital Picture of Health Aliénor and her cohorts will probably travel more than young 20-somethings today, Cummings predicted. And travel guidebook publisher Lonely Planet is already trying to make travel safer and easier for them by digitizing its vast repository. See also: 8 Things to Know About Insurance   “They see a world where you’re walking around in Vietnam, and they say, ‘Turn left over here because there’s a cool temple,’” Cummings said of Lonely Planet’s efforts. “And they’re already including insurance.” Beyond helping Aliénor and her friends safely see the world, new insurance products could also help them mitigate risks to their wealth and business — and even their health, according to Cummings. Biotechnology company Livongo and the Vitality wellness program use high-tech to offer consumer-style experiences in healthcare, providing feedback, encouragement and incentives to people who keep their fitness up and health insurance costs down. A Picture Will Last Longer “A lot of those models are already emerging,” Cummings said. “I don’t think we have to wait until Aliénor is 21 years old to start imagining these kinds of things.” So make that mental note of what insurance looks like today. Because it might not look that way for much longer. This story originally appeared on the SAP Community.

According to one published report, (WorkCompCentral, March 4, 2016, “$100 Million in Workers Benefits Sits Unused”), only 3,955 checks have been issued to injured workers from the Return to Work (RTW) Fund established in Senate Bill 863. The checks total slightly less than $20 million, leaving an additional $100 million untapped by injured workers. According to regulations of the Department of Industrial Relations (DIR) that administers the fund, workers receive a $5,000 allowance if they have been issued a Supplemental Job Displacement Benefit (SJDB – commonly referred to as a “voucher”). The voucher is issued if the employer at injury fails to make a qualifying offer of employment to the worker. While the provenance of the RTW Fund has been criticized – largely by those not in the room to witness its birth – there are more fundamental issues with the fund and its administration. First, the RTW Fund really has nothing to do with return to work. It can be fairly assumed that the use of that particular section of the Labor Code – Section 139.48 – was a legal accommodation because there was existing statutory reference to the RTW Fund in Labor Code Section 62.5 – specifically Sec. 62.5(a)(1)(B). Section 62.5 is the Workers’ Compensation Administration Revolving Fund statute. That reference, in turn, was to the RTW Program that was originally created more than 15 years ago in Assembly Bill 749 as a mechanism to partially subsidize certain employers who brought injured workers back to work. The employer subsidy as originally enacted was for wages and worksite modifications. Later, Senate Bill 899 further revised the RTW Program to limit the reimbursement to worksite modifications and to expend funds on an “as available” basis. The RTW Program sunset on January 1, 2010, but while Labor Code Sec. 139.48 was taken out of the code, the reference to the RTW Fund in Sec. 62.5 remained. See Also: A Physician's View of 'Return to Work' Once one gets past the title of “Return-to-Work Program,” however, there is no evidence to suggest that Sec. 139.48 has anything to do with returning a worker to employment with the employer at injury – or anyone else for that matter: “139.48. (a) There is in the department a return-to- work program administered by the director, funded by one hundred twenty million dollars ($120,000,000) annually derived from non-General Funds of the Workers’ Compensation Administration Revolving Fund, for the purpose of making supplemental payments to workers whose permanent disability benefits are disproportionately low in comparison to their earnings loss. Moneys shall remain available for use by the return-to-work program without respect to the fiscal year. "(b) Eligibility for payments and the amount of payments shall be determined by regulations adopted by the director, based on findings from studies conducted by the director in consultation with the Commission on Health and Safety and Workers’ Compensation. Determinations of the director shall be subject to review at the trial level of the appeals board upon the same grounds as prescribed for petitions for reconsideration. "(c) This section shall apply only to injuries sustained on or after January 1, 2013.” The history of Labor Code Sec. 139.48 is also influenced by the Commission on Health & Safety & Workers’ Compensation (CHSWC) publication, “Report on the Return-To-Work Program Established in Labor Code Section 139.48” (2009). The most telling aspect of that report was the “alternative” recommendation to the Legislature: “California may wish to consider eliminating the program. California may wish to consider a program that more directly assists injured workers who are unable to return to their previous jobs.” (p.7) Given that the program sunsetted roughly eight months later, the commission’s recommendation is almost prophetic. Three years later, as required by SB 863, the DIR conducted an independent study to determine how best to structure the RTW Fund in the new and improved Labor Code Sec. 139.48. That responsibility fell upon the ubiquitous RAND Corporation, whose 2014 report, “Identifying Permanently Disabled Workers with Disproportionate Earnings Losses for Supplemental Payments” is the foundation for the current RTW program. Among its recommendations were to make eligibility for the program dependent on receiving a voucher. According to RAND, approximately 20% of injured workers receiving permanent disability benefits receive a voucher. (p. 12) Under RAND’s scenarios, and anticipating utilization of the RTW fund at the same approximate levels as the vocational rehabilitation program repealed in 2004 by Assembly Bill 227 rather than their observed voucher utilization figures, RAND estimated roughly 24,000 injured workers would access the RTW Fund, thus resulting in about $5,000 per recipient to exhaust the $120 million annual assessment. So while that explains where we are today, it also raises questions about whether the current RTW program suffers from the same lack of awareness that caused its statutory predecessors to go quietly away. But that also raises the bigger issue: What has happened to re- employment as an objective of the system over the past 20 years? The history of vocational rehabilitation in California’s workers’ compensation is a long one – culminating in the repeal of the mandatory vocational rehabilitation program in AB 227 and the repeal of vocational rehabilitation as a compensable benefit with the amendment to Labor Code Sec. 3207 in SB 899. Legislative efforts trying to suggest that return to work is still important in the workers’ compensation system have largely been limited to the voucher, an at-best-meager program that is intended to try to put the injured worker on the path toward gaining skills to find new employment. In no way, however, is it as robust as the former vocational rehabilitation program. It is, regrettably, a $6,000 check, with some restrictions, that is intended to finalize the severing of the tie between an injured worker and the employer at injury. See also: Return to Work Decisions on a Worker’s Comp Claim   To paraphrase Will Turner in Pirates of the Caribbean, “That’s not good enough!” As we move forward and discuss a whole host of issues in the workers’ compensation system, such as utilization review, the use and abuse of opioids, prescription drug formularies, independent medical review and permanent disability ratings, perhaps someone, somewhere, likely in either Oakland or Sacramento, should talk about re-employment of disabled workers. Not some resurrection of vocational rehabilitation and what became its abuses but, rather, simply how to help workers unemployed due to a disabling injury at work to have the same access to re-employment assistance as disabled or otherwise unemployed workers whose access to re-employment assistance is defined by multiple state and federal programs and not by extracting some form of payment from the employer at injury. There is no shortage of programs that could provide such assistance. And perceived unintended consequences that expanding the scope of re- employment assistance beyond the employer at injury would increase the number of workers unemployed after a workplace injury are unlikely given the protections of the Fair Employment and Housing Act (FEHA), the Americans with Disability Act (ADA) and Labor Code Sec. 132a. According to the Workers Compensation Insurance Rating Bureau (WCIRB), in calendar year 2014 roughly $29 million was spent on vouchers. Labor Code Sec. 139.48 assesses $120 million annually. One should ask whether that money would be better spent providing access and coordination to the host of re-employment programs offered by the Department of Rehabilitation, the Employment Development Department (CalJOBS), non-profit private companies, such as Goodwill Industries, that offer re-employment assistance, and a host of federal programs, including those offered from the U.S. Department of Labor, Office of Disability Employment Policy and the Social Security Administration’s Plan To Achieve Self-Support (PASS). In today’s complex world we simply cannot expect the employer at injury – especially the small to medium-sized employer – to provide all the resources necessary to facilitate meaningful re-employment for injured workers who are permanently disabled. Expanding the concept of re-employment and coordinating programs designed to create jobs for the disabled is a logical step forward to address this problem. No amount of vouchers or RTW fund disbursements will ever be a viable substitute for a job. The sooner we realize this and look to Sacramento and Washington to break down the barriers created by the workers’ compensation system to full access to re- employment resources for disabled workers, the better.  

Just before the Italian Renaissance, guilds were formed in Florence and throughout Italy to bring together people of like occupations under a social network. Their purpose was to agree upon standards and rules, represent the group to government, improve upon their art, science or trade and provide support services to families and widows when needed. Working together, these guilds fostered Renaissance attributes. They were patrons of the arts. They contributed to the advancement of medicine and technology. They advanced construction methods and learning in all spheres. In fact, the end of many guilds was brought about when they were merged into universities. The Renaissance created a cultural bridge from the Middle Ages or past to modern history. However, the Renaissance didn’t just sprout up overnight. It was spurred on by a convergence of factors, the greatest of which was increased wealth. Trading in Florence had produced a new class of financier who was willing to fund artistic and scientific endeavors. Wealth created ease. Ease allowed time for thought and innovation.   Innovations in practical sciences, such as mathematics and architecture, benefited from broader thinking. Fast forward to today, and the comparison to that time is striking, with a similar influx of money and a new class of insurance technology investment via insurtech. Insurtech as a concept has grown to become, not an official organization, but a collaborative movement. It has become a bridge from the old to new being created in the insurance industry today. Insurtech:  A New Era of Innovation Insurtech as a movement branched out from fintech (financial services focus) earlier this year following reports of significant capital entering the market for insurance startups … from insurers and MGAs to technology providers. Significant capital investment in insurtech for new insurance greenfield or startup companies is fueling massive innovation in products, services and business models and de novo options. These de novo options are a driving force underpinning the insurtech movement and why new and existing companies are looking to new business models to innovate, test ideas and bring new products and solutions to market. See also: The Insurance Renaissance (Part 1)   A host of venture-backed startups have propelled property & casualty insurance tech investment deals to a new high in 2016, with total funding to insurance tech startups topping $1 billion in the first half of 2016, according to CB Insights. 63% of deal activity to the insurance tech market went to U.S.-based startups in the first half of 2016.  Startups that distribute policies or provide software and services across the P&C insurance value chain have risen 50% compared with all of 2015. And life insurance is now also ramping up. We saw an innovation movement in spades last week at the much awaited InsureTech Connect Conference in Las Vegas, which brought together more than 1,500 entrepreneurs, technologists, venture capitalists, insurance executives and startups. The energy, engagement and enthusiasm were infectious. It had the feeling of the “dot com” era… but with more substance. This gathering sent a clear message to the insurance industry, that we have rapidly entered a new era that is more profound and important… a renaissance. It has placed the importance of innovation and technology on a stage and signaled that, from here forward, insurance must and will be innovating. But like the forming of guilds, insurtech demands cooperation and conversation. InsurTech and Insurance Renaissance Just like the original Renaissance, today’s Insurance Renaissance is spurred by the converging factors of people, technology and market boundaries. Insurtech is powered by all three. Within insurance, this new Renaissance represents a real shift with significant business impli­cations beyond legacy modernization. It represents a whole realm of new opportunities via greenfields, startups and incubators to cover a fast-changing market landscape. In our view, based on our Future Trends – A Seismic Shift Underway thought leadership report in January 2016, and picked up by many in the insurtech movement, there are three main areas of impact:

• People – Expectations, products and business models that were built around the silent and baby boomer generations, do not meet the millennial and Gen Z expectations or needs. More importantly, Gen X is the “swing group” tipping with millennials and Gen Z. These changes in people’s lives drive changes in their expectations and their risk profiles/needs, reflected in our coming primary research on customer expectations for individuals and small business owners.
• Technology – How often do you use your smartphone in your daily life for researching, buying, servicing and convenience? Think Amazon, Uber, news and music. These new expectations drive businesses and institutions to use technologies and processes to develop new business models and channels, which give customers the capabilities they’re seeking.
• Market Boundaries – Market boundaries are being erased. New competitors and new channels are at the forefront of the insurtech movement. Consider how the largest number of startups are build around new distribution options. Then think about how existing and new businesses from Tesla, Ford and Trov are looking to offer insurance as part of an auto purchase. These new business models and capabilities will drive additional changes in people’s lives, leading to new needs.

Insurtech Leadership and Options As we have tracked, observed and talked to our customers and other influencers/leaders in the industry this year, we are convinced this is not a “new fad” but a movement with substance that is just getting started. Unlike the “dot com” era, many of the insurtech participants have real capabilities, real business plans and real substance in how they can enable the industry through our renaissance to meet and exceed the expectations of our customers. But it requires leadership, vision and active collaboration/participation.  Standing on the sidelines waiting to be a fast follower or thinking you can do it yourself will likely not work this time.  What is different?  Chunka Mui reminded our customers at the Majesco Convergence Conference, just before InsureTech Connect, that the industry is moving at such a rapid pace that the gap between today’s technology and future technology possibilities is being filled by insurtech active participants. From here forward, tech advancement won’t slow to allow followers to catch up. See also: The Insurance Renaissance, Part 2   It is 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 insurtech will be a big part of that future and are committed to helping shape, embrace and engage in the movement to enable the renaissance of insurance.

I really like the word "hypocrite." Not because of what it means, but because of where it came from. One of my hobbies is etymologies, which is exploring word origins and the way their meanings have changed over time. I especially enjoy word origins that have a vivid picture behind them, and "hypocrite" has a fascinating historical word origin and picture. "Hypocrite" comes to us from the Greek word hupokrités (ὑποκριτής) and was commonly used of actors on the stage. Because Greek actors performed behind a mask, the word came to mean two-faced, someone whose profession does not match his practice, one who says one thing but does another, whose words and actions don’t agree. While the comparison may sound outlandish, isn't hypocrisy what we do when we send out a certificate of insurance? In our desire to simplify and summarize policy information, we are inserting a filter that potentially hides and distorts the truth. Rather than directly show data from the policy, we put something in between, resulting in cost, delays and confusion. See also: Certificate of Insurance Management -- Essential Protection Against Unexpected Liability At least three independent studies indicate that 40% to 50% of all certificates that indicate additional insured status are incorrect. Would you knowingly allow an insurance document with your name, and that of your organization, on it to go out with errors? At best, what happens with certificates deserves a D- grade and a stinging, costly indictment of the industry as a whole. Today, the bulk of the certificate burden falls on the agent/broker. But with carriers desiring to directly enter the small commercial insurance marketplace, the effort, cost and potential liability of certificates will now transfer directly to carriers. Certificates are not harmless or benign; they are expensive, ticking time bombs creating confusion and cost at best, soiled reputation and financial ruin at worst. Certificates also open up a Pandora's Box to add wording in conflict to the policy, implying that coverage is in place when it actually is not. Let me give you a real life example: An insured received a certificate for a rodeo. After the event ended, some bulls got loose, sending several people to the hospital. An average professional bull is about the size of a small car, weighing in at between 1,600 and 1,700 pounds. Not until the injured patrons sued was it discovered that the special events policy excluded coverage for bodily injury or property damage caused by animals. It sure sounds like someone dropped the ball: a policy to cover a rodeo that excluded losses caused by animals? See also: How to Apply 'Lean' to Insurance Issuing certificates is looked down on as a clerical, workflow or technology issue by many. Get a request, merge the data, email it out, done. But issuing a certificate is more than just clicking on a web site button to mindlessly generate a PDF. It's more than a limit amount; it's understanding and explaining what is covered and excluded. Insurance is oh so much more than technology or workflow. It's a promise to understand needs, matching coverage and protection. It's a promise to help and restore in time of trouble or loss. A next-generation solution to replace certificates is needed to continually verify coverage and compliance. The solution must also understand policy language, alerting all stakeholders to what is and is not covered. It's time to take off the hypocrite mask of certificates. Marketplace conditions and technology are now available to replace the hypocrite certificate with information directly from the policy!

Despite the growth of digital channels, insurers seem to be stuck in an analog world, unable to respond accurately, quickly or consistently to customer queries asked via the web, email, Twitter, Facebook or chat, according to new research that we've done. Insurers could only answer 28% of queries across digital channels, and 14% of companies failed to respond successfully on either email, social media or chat. While email was the strongest channel for answers, with a 37% success rate, the average time to receive a response was nearly two days (1 day 23 hours 38 minutes). These are the top-line findings of the 2016 Eptica Insurance Multichannel Customer Experience Study, which evaluated 100 leading U.S. insurers, spread across 10 sectors, on their ability to provide answers to routine questions via email, the web, chat, Facebook and Twitter. Additionally, 1,000 consumers were polled on how long they were willing to wait for responses on these channels. The study measured the ability of insurers to provide answers to 10 routine questions via the web, as well as their speed and accuracy when responding to email, Twitter, Facebook and chat. Questions were deliberately similar to those that consumers ask, such as around purchasing or administering policies online, discounts for multiple products and when cover would start. Insurers provided answers to 30% of questions on their websites, 23% in response to Facebook messages and 12% to tweeted queries. There were big differences between particular sectors – pet insurers answered 57% of questions online, compared with 16% among long-term care providers. One dental insurer responded to an email in 13 minutes – yet another took more than 6 days to answer the same question. The insurance industry is at a crossroads, with the rise of digital disrupting traditional ways of doing business. To succeed in this new world, insurers need to prioritize the digital customer experience, yet the Eptica study shows that they are struggling to adapt and move away from analog channels. Digital doesn’t just benefit consumers, but also drives greater efficiency and enables innovation – it is therefore time for insurers to learn from their peers in other industries and apply best practice to their operations to meet changing customer needs. See also: Answer to a Better Customer Experience?   The research found that insurers are out of step with consumer expectations. While more than half of consumers (57%) expect a response on Twitter within half an hour, just 26% of insurers met this deadline, with the majority of replies not answering the queries. 61% of consumers complained that they could not find information on company websites half the time they looked for it. On social media, speed varied wildly. One long-term-care insurer successfully responded to a tweet in less than two minutes, while 13 companies answered on Facebook within within minutes. Yet at the other end of the spectrum, 20 insurers took more than six hours to respond on social media, with three taking a day or more. There was little consistency between different channels, showing that many are taking a silo-based approach to customer service that pushes up costs and slows service. Additional key findings included:

• 68% of responses on email, Twitter and Facebook asked the researcher to change channel and call, even for the most basic queries
• 47% of insurers failed to provide consistent answers between different channels
• Just one company replied on all four channels of email, Facebook, Twitter and chat
• 17% of insurers claimed to offer chat, yet only 5% had it operational when they were evaluated
• Nearly half (46%) of consumers said they’d spend just five minutes searching for information on a company website before giving up and going elsewhere
• U.S. performance trails the U.K., where insurers answered 54% of all questions, 80% of those asked via email and 45% of those made via the web.

Eptica Insurance Multichannel Customer Experience Study methodology In total, 100 company websites across 10 different insurance sectors were evaluated in September 2016:

1. For their ability to answer 10 basic, sector-specific questions via their website, such as, Can I purchase my policy online, or, How can I cancel my policy?
2. On the speed and accuracy of their response via the email, Twitter, Facebook and chat channels.
3. On the consistency of responses across the web, email, Twitter, Facebook and chat.

Consumer research on channel expectations was conducted by Toluna with 1,000 American insurance buyers in September 2016. See also: How to Redesign Customer Experience   The full 2016 Eptica Insurance Multichannel Customer Experience Study, which includes a full listing of companies evaluated, a detailed sector by sector breakdown of performance and full analysis, can be downloaded from http://www.eptica.com/insurance-multichannel-customer-experience-study. An infographic illustrating the results is available from: PDF: http://www.eptica.com/infographic-insurance-multichannel-cx JPG: http://www.eptica.com/infographic-2016-insurance-eptica-multichannel-cx

A decade ago, straight-through processing was a buzzword, and speed to market was critical. The progress that financial institutions have made in making almost all aspects of their transaction footprint digital has left little to leverage on the transaction side. Today, while most organizations are busy revamping their policy administration systems, which were long ready to be replaced a decade ago, the companies that will be set apart are those that start considering machine learning and artificial intelligence (AI) for their core systems. If you look at the fundamentals of any kind of insurance, at the core, insurance offerings are about risk pooling and the ability of the insurer to price products so that over time the premium revenues outstrip the claims experience. Historically, all the analysis has been done by people, and rightly so, as we lived in a world that was not connected, and human intervention to analyze outside factors was critical. See also: What You Must Know on Machine Learning   Fast forward to current time: All the data is on some kind of digital medium and more often than not connected and accessible. What is missing is the machine learning and artificial intelligence integration into the different facets of the insurance life cycle and the software platforms that are used to manage and maintain the data. The amount of data that needs to be analyzed and the patterns that are needed to be determined are so humongous that relying on data analysis by a person alone may not be the best approach. If you use Google often, you have noticed that now Google can predict what you are searching and what you are looking for based on data it collects on your location, your emails, your past transaction etc. Over time, there will be a cognitive angle to the search capabilities exhibited by Google. If you apply the same rule of thumb to underwriting, insurance pricing and risk aggregation, why would we not want to leverage machine learning in a similar manner? For this to happen, we need to start building software systems with not just automation in mind but also a consideration of how system design can extend machine learning. If the dots are connected and the data patterns understood and logic applied, there are certain decision making aspects that can move away from people to machines and over time evolve to largely autonomous ecosystem. What will differentiate the market leaders from the laggards is investment in this aspect. These changes will come in the next decade or maybe even sooner, and the underwriting and actuarial aspects will lean toward machine learning and AI-assisted functions. The next wave would lead to a totally autonomous ecosystem. The picture simplistically highlights the possibilities of embedding machine learning in the software ecosystem that we see in today's insurance landscape. This is a generalized view, agnostic of the domain or line of business. Insurance carriers would need to start thinking out of the box to translate this into software platforms of the future, pushing current roles into those that co-exist or radically change them. Before we set the drones to fly and change the commercial insurance ecosystem, machine learning and AI need to be adopted into mainstream core software platforms. The emerging market in the foreseeable future will be opened to the players that will NOT be consumed with dev-ops and pushing the realms of delivery automation but by those firms investing in infusing machine learning and artificial intelligence into core platforms enabling underwriting and actuarial functions to be supplemented by machines. See also: How Machine Learning Changes the Game   Insurance has traditionally followed and adopted what has been tried and tested in the banking space. For a change, there may be an opportunity for insurance carriers to take the lead and beat the banks and other financial institutions to set free the machines and change the way products are conceived and priced and premiums calculated.

In the modern insurance world, personalization is about more than modifying content to match consumer profiles. It’s about meeting consumers’ needs more effectively, making interactions easier and increasing overall satisfaction. Remember, the consumer experience is a funnel, and personalization can be applied to each touch-point in the funnel. Personalize all platforms of interaction: in person, mail, phone calls, email, website and mobile. See also: The Case for Personalization   When it comes to insurance, consumers want the process to be easy. Your use of personalization should align with that belief. Personalized service is important to consumers, and according to one study, 80% of insurance customers are looking for personalized offers, messages, pricing and recommendations from their auto, home or life insurance providers. Give your consumers what they’re looking for. The 3 Types of Data You Need for Personalization: With the Internet of Things, the majority of consumer touch-points are now digital. Use the available data to help improve your personalization techniques.

• Demographics: Leverage the consumer data you have—age, gender, location, platform preference (mobile, email, by mail, only digital), expressed interests—to better meet your customers’ needs. Asking consumers to repeat or re-enter information that they’ve already shared shows them that you don’t care. Know their demographics to show that you do.
• Past Contact: What is the consumer’s history with you? Use the historical data to your advantage. A record of contact with the customer is necessary and can greatly inform all future contact. Recall their previous experiences to better understand and meet their current needs.
• Present Context: Consider the present context data for personalization. What type of device is the consumer using? Which browser is she searching on? For what reason is he contacting you? This can inform the method of personalization used to better meet their needs effectively.

Personalization in Action Depending on your sector within the insurance industry, your method of personalization may differ. An insurance company may use personalization in a slightly different manner than independent agents do. Here are some personalization methods that put the three types of data mentioned above to use. Amend these methods to fit your sector and help improve the consumer experience.

• Contextualize language, images or graphics based on the consumer’s location in emails, mailing materials and in-app offers. Using an image of the consumer’s city or a well-known landmark can help show that you are aware of who your consumers are. Using language that matches your consumer’s demographics and is relevant to his age, location, occupation or needs will also be more useful to him. You can always A/B test to see which method resonates best.
• Refer to previous contact in current interactions. For example, an agent could say: “The last time we spoke was in November. Are you still the primary driver for your Nissan Altima?” Or a home insurer could send a follow-up email to ask how the home repairs went after a filed claim.
• Personalize email headers or content in reference to local events or happenings in the consumer’s location.
• Offer helpful, relevant information. Insurance apps may offer driving routes, roadside assistance and real-time weather reports or warnings. Similarly, agents can send email updates warning of a coming snowstorm or local incident that may affect their customers. Telematics companies could send home or car maintenance tips, reminding customers that it may be time to check their smoke detector batteries or get an oil change.
• Personalize offers to customer interests. If the consumer travels a lot, she may want to know more about rental car insurance or travel insurance. If a driver has had several recent accident claims, an agent could recommend technologies or courses to help improve skills and cut costs.

See also: 5 Stages on Journey to Personalized Insurance   Why Does Personalization Work? Personalization works because it’s relevant. When relevant information is provided, it meets consumers’ needs more effectively and efficiently. Relevant information speed interactions and improves consumer satisfaction. Every interaction with a consumer is not a singular event, but part of a collective path. With the growth of the Internet of Things, insurance is becoming more personalized and tailored to each consumer. Use the available data to deliver the right promotion, content and service to meet your consumers’ needs.

The goals you set for your organization might be sabotaging the very success that you’re trying to cultivate. That’s the message from Professors Maurice E. Schweitzer, Lisa D. Ordonez, Adam Galinsky and Max Bazerman – all of whom should surely win an award for the most creative titling of an academic research paper (“Goals Gone Wild” in the Academy of Management Perspectives journal). In a recent New York Times article, the professors’ research was highlighted along with intriguing examples of the unintended consequences of goal setting. Like this gem: An NFL team, in an effort to improve the performance of an interception-prone quarterback, added a clause to his contract penalizing him for every pass thrown to the opposing team. The result? The QB threw fewer interception -- but only because he stopped throwing the ball altogether, which wasn’t the desired outcome. See also: Your Data Strategies: #Same or #Goals?   This goal-setting phenomenon is routinely on display in business circles, when companies focus so relentlessly on a metric that their people over-rotate on it. That ultimately drives undesirable, sometimes even awkward behavior. Perhaps you’ll recognize some of these examples from your own experience, as a businessperson or as a consumer:

• Auto dealerships where franchise recognition is so closely tied to “top box” scores on a satisfaction survey that staff practically beg customers for an “Excellent” rating.
• Call centers that set targets for call length, leading service representatives to be more interested in getting customers off the phone than in actually helping them.
• B2B firms that use Net Promoter Score (NPS) as their primary gauge of performance, leading company representatives to hand-deliver the NPS survey at the most auspicious occasions (like on a golf outing with a client).
• Companies with such laser-focus on market share targets that they acquire new business at all costs, even at the expense of profitability.
• Human resource recruiters who are held accountable for qualified candidate “yields” from their sourcing methods, leading them to pass less-than-ideal applicants through the recruiting pipeline.

To avoid making your organization’s goals its own worst enemy, keep these four tips in mind: 1. Consider unintended consequences. In the fervor to address a business issue and rally the troops around an effort, organizations leap to embrace a metric without carefully considering all of the downstream impacts. Contemplating a new measure, or a renewed focus on an existing one? Put on your contrarian hat for a moment. Think of all the bad things that could happen if your staff focused, to a fault, on the line you’ve drawn in the sand. Based on how detrimental and probable those unintended consequences are, tweak your approach accordingly. 2. Strive for balance. Guard against over rotation on any single metric by creating a balanced system of measures. For example, if you want to encourage a sales-oriented culture, but wish to avoid staff making sales at any cost, then only reward those top salespeople who also meet some performance threshold for profitability or customer satisfaction. 3. Set Goldilocks goals. Setting goals is one management task where it’s dangerous to be cavalier. Set the bar too high, and you create unrealistic performance expectations that can disengage your staff or, worse, lead them to game the system. Set the bar too low, and you miss an opportunity to get people to stretch toward a higher level of performance. If you want to set a goal, first track the metric for a time to get a sense of its variability as well as the current performance level. That’ll help you set an informed goal that’s more likely to motivate rather than frustrate. 4. Beware the tie to compensation. Pay for performance – yes, I’m all for it. But organizations can get into trouble when they move too swiftly to tie particular metrics (especially new, unproven ones) to individual compensation. First, get some experience under your belt tracking the metric and providing individual feedback based on it. Then structure the compensation linkage in a way that reinforces a balanced approach to measurement. See also: Integrating Strategy, Risk and Performance   When it comes to performance measurement and goal setting, simple “carrot and stick” thinking won’t suffice. Business leaders must invest some real time engineering this piece of their workplace puzzle. It’s the best way to ensure that your organization’s goals are working for you, and not against you.

Walmart, a true leader in benefit innovation, is taking the next right step, expanding its popular and successful Centers of Excellence. When Walmart workers, called associates, use Centers of Excellence, deductibles and co-pays are waived. All travel expenses are paid for the patient and a companion. Starting next year, if covered folks at Walmart have spine surgery outside of a Center of Excellence, it will be considered out of network, and only 50% of the costs will be covered. This is a huge step and is reminiscent of the early days of preferred provider organizations (PPOs), provider networks and health maintenance organizations (HMOs). At the beginning, if you got care through a PPO, your deductible and co-pay were waived. In a few short years, those programs evolved into ones that paid regular benefits with deductibles, etc., if you used PPO doctors, but applied higher deductibles and co-pays if members went out of network. Of course, in most HMOs, if members went out of network, nothing was paid. See also: Walmart’s Approach to Health Insurance   What Walmart is doing now, while a very logical extension of what benefit plans have been doing for more than 30 years, is a huge step forward in truly controlling waste, overtreatment and misdiagnoses in health plans. Kudos. Here is the press release: The Right Care at the Right Time: Expanding Our Centers of Excellence Network Starting next year, Walmart will double the number of world-class medical facilities available to our associates who have been told they need a spine surgery. Whether you’re a cashier in Wyoming who’s been with the company for six months or you’re a 20-year associate running a store in Miami, if you have Walmart health insurance, you have this benefit. We are adding the Mayo Clinic facilities in Arizona, Minnesota and Florida to our current list of Centers of Excellence (COE) for spine surgeries, which are Mercy Hospital Springfield in Missouri, Virginia Mason Medical Center in Washington and Geisinger Medical Center in Pennsylvania. Our COE program is about more than just access to these facilities and their specialists; it covers these procedures at 100%, including travel, lodging and an expense allowance for the patient and a caregiver. Why would Walmart offer a benefit like this? It’s pretty simple – we care about our people and want them to receive the right care at the right time. Walmart started offering this benefit in 2013, and our data tells us we are making a difference for our people, but we want to do more. That’s one of the reasons for adding more eligible medical facilities to the program. Other reasons these medical facilities were selected are that each facility:

• Fosters a culture of following evidence-based guidelines, and, as a result, only performs surgeries when necessary.
• Structures surgeons’ compensation so they [have incentives to provide] care based on what’s most appropriate for each individual patient and look at surgery as a last option.
• Is geographically located throughout the country to provide high-quality care to participants in one of Walmart’s health benefits plans.

Research, as well as our own internal data, shows about 30% of the spinal procedures done today are unnecessary. By utilizing the Centers of Excellence program, our associates are assessed by specialists who are [given incentives] differently to get to the root cause and prescribe appropriate treatment. Our associates are very important to us, and we want to make sure they and their families receive the highest level of quality care available. Preventing a surgery that someone doesn’t need is only part of our Centers of Excellence. The other, even more important aspect is making sure our people receive the right diagnosis and care plan for their pain. In The New Yorker, renowned surgeon and public health researcher Atul Gawande underscored the importance of this approach: “It isn’t enough to eliminate unnecessary care. It has to be replaced with necessary care. And that is the hidden harm: Unnecessary care often crowds out necessary care, particularly when the necessary care is less remunerative. Walmart, of all places, is showing one way to take action against no-value care—rewarding the doctors and systems that do a better job and the patients who seek them out.” Walmart is not alone in this approach to appropriateness of care. One example is the Choosing Wisely initiative, which is backed by recommendations from more than 70 specialty societies including the American Academy of Orthopaedic Surgeons, North American Spine Society and the American College of Surgeons. The stated purpose of Choosing Wisely is to help patients choose care that is supported by the evidence, not duplicative of other tests or procedures already received, free from harm and truly necessary – we couldn’t agree more. To further encourage our associates to take advantage of this offering, next year, spine surgeries at one of our six Centers of Excellence medical facilities will continue to be covered at 100% with travel and lodging paid for the patient and a caregiver. If the surgery is performed outside of a COE facility, it will be considered out of-network and paid at 50% in most cases. Our associates are very important to us, and we want to make sure they and their families receive the highest level of quality care available.  We have seen spine surgeries performed often when they are not necessary. By making these changes in our benefit offerings next year, Walmart wants to make sure that our associates and their family members are diagnosed correctly and that they get the best possible treatment. See also: There May Be a Cure for Wellness  

The triggers that have induced the insurance industry to innovate have dramatically changed in this millennium. Up until the 21st century, little innovation occurred, because insurers were looking to create products for emerging risks or underinsured risks. Innovation occurred most often as a reaction to claims made by policyholders and their lawyers for losses that underwriters never intended to cover. For example, the early cyber policies, which insured against system failure/downtime or loss of data within automated systems, were created when claims were being made against business owners policies (BOPs) and property policies that had never contemplated these perils. Similarly, some exclusions and endorsements were appended to existing policies to delete or add coverage as a result of claims experience. Occasionally, customer demand led to something new. Rarely was innovation sought as a competency. Fast forward to today, when insurers are aggressively trying to develop innovative products to increase revenue and market share and to stay relevant to customers of all types. Some examples include: supply chain, expanded cyber, transaction and even reputation coverages. With sluggish economies, new entrants creating heightened competition, emerging socio-economic trends and technological advances, insurers must innovate more rapidly and profoundly than ever. The good news is that there is movement toward that end. Here is a sampling of the likely spheres in which creativity will show itself. Space Insurers have already started to respond to the drone phenomenon with endorsements and policies to cover the property and liability issues that arise with their use. But this is only the tip of iceberg in comparison with the response that will be needed as space travel becomes more commonplace. Elon Musk, entrepreneur and founder of SpaceX, has announced his idea for colonization of Mars via his interplanetary transport system (ITS). “If all goes according to plan, the reusable ITS will help humanity establish a permanent, self-sustaining colony on the Red Planet within the next 50 to 100 years” according to an article this September by Mike Wall at Space.com. See also: Innovation — or Just Innovative Thinking?   Consider the new types of coverages that may be needed to make interplanetary space travel viable. All sorts of novel property perils and liability issues will need to be addressed. Weather Weather-related covers already exist, but with the likelihood of more extreme climate change there will be demand for many more weather-related products. Customers may need to protect against unprecedented levels of heat, drought, rain/flood and cold that affect the basic course of doing business. The insurance industry has just taken new steps in involving itself in the flood arena, where until now it has only done so in terms of commercial accounts. Several reinsurers -- Swiss Re, Transatlantic Re and Munich Re -- have provided reinsurance for the National Flood Insurance Program (NFIP), for example. Insurance trade associations are studying and discussing why primary insurers should do more in terms flood insurance as a result of seeing that such small percentages of homeowners have taken advantage of NFIP's insurance protection. Sharing Economy As a single definition for the sharing economy begins to take shape, suffice it to say that it exists when individual people offer each other products and services without the use of a middleman, save the internet. Whether the product being offered is a used handbag, a piece of art or a room in a private house or whether the service is website design, resume writing or a ride to and from someplace, there are a host of risk issues for both the buyer and seller that are not typically contemplated by the individual and not covered in most personal insurance policies. This is fertile ground for inventive insurers. How can they invent a coverage that is part personal and part commercial? Smart ones will figure out how to package certain protections based on the likely losses that individuals in the sharing economy are facing. Driverless Cars So much has already been written about the future of driverless cars, but so many of the answers are still outstanding. How will insurance function during the transition; who will be liable when a driverless car has an accident; who will the customer be; what should the industry be doing to set standards and regulations about these cars and driving of them; how will subrogation be handled; how expensive will repairs be; how will rates be set? A full list of unanswered questions would be pages long. The point for this article is – how innovative will insurers be in finding answers that not only respond to these basic questions but also provide value-added service that customers will be willing to pay for? See also: Insurance Innovation: No Longer Oxymoron   The value added is where real innovation comes into play. Something along the lines of Metromile’s offerings for today’s cars is needed, such as helping drivers to find parking or locate their parked cars. Such added value is what might stem the tide of the dramatic premium outflows that are being predicted for insurers once driverless cars are fully phased in. Corporate Culture and Reputation Recent events indicate that corporations need some risk transfer when it comes to the effects of major corporate scandals that become public knowledge. The impact from the size and scope of situations such as the Wells Fargo, Chrysler, Volkswagen and other such scandals is huge. Some of the cost involves internal process changes, public relations activities, lost management time, loss of revenue, fines and settlements. Reputation insurance is in its infancy and warrants further development. And though insurance typically does not cover loss from deliberate acts, especially those that are illegal, there is enough gray area in many scandals that some type of insurance product may be practical despite the moral hazard and without condoning illegal behavior. And the Risk All innovation poses risk. Risk is uncertainty, and innovation leads to uncertain outcomes. Just as insurers must create solutions, they must be willing to acknowledge risk, assess risk, mitigate risk and prepare for some level of risk to materialize. So, as insurers are now actively trying to innovate, they must make sure that their enterprise risk management practices are up to addressing the risks they are taking. For each new product, some of these risk areas must be explored:

• Is there a risk that projections for profitability will be wrong?
• If wrong, by how much, and how will this shortfall affect strategic goals?
• What is the risk appetite for this product initiative?
• What is the risk the new product will not attract customers, making all development costs wasted expense?
• What is the risk that price per exposure will be incorrectly estimated, hurting profitability?
• What is the risk for catastrophic or shock losses relative to the product?
• How will aggregation risk be handled?
• What is the risk that litigation concerning the policy coverages will result in unintended exposures being covered?

Conclusion Regardless of whether or not they have been dragged into innovation by disruptive forces, insurers are finally ready to do more than tweak products around the edges. The risk of not innovating appears to be greater than the risk associated with innovating.