Why did we call David an underdog? He was young and smaller, whereas Goliath was older and a giant of a man, “whose height was six cubits and a span”. Goliath was an experienced warrior, a veteran soldier, whereas David was a mere shepherd. Goliath was outfitted with modern weaponry and all David had were his shepherd’s tools. This contrast and disparity is because there were three types of warriors in ancient times:  First, there were warriors who fought with slings and bows as lightly armored troops, forming bands of skirmishers. Second, there were the more heavily armored soldiers who formed the bulk of the infantry as foot soldiers, who fought in close-quarters combat with swords, axes, pikes and spears, such as Goliath. Lastly, there were warriors who fought on horseback as the cavalry. Goliath was a foot soldier with sword and spear, David a skirmisher with a stave and sling.  As the story goes, Goliath and David started their duel with some distance between them, Goliath expecting David to draw near and engage in combat. He wanted to engage David in a hand-to-hand fight where his reach and strength would make him unbeatable. David, however, decided on a different strategy, which played to his strengths as a shepherd, using a sling to defend his flock against lions and wolves.  He rejected the heavy armour and focused on what he knew best — excelling at attacking from afar with great accuracy. So here was David, the shepherd, experienced in the use of a devastating, precise weapon, up against a giant weighed down by a hundred pounds of armour and incredibly heavy weapons that are useful only in short-range combat. Goliath was a sitting duck. He didn’t realise it, but he had been outsmarted before the combat had even begun. So how does this story relate to the insurance industry? If you are a “large” and “established” insurance company (Goliath), the headlines regarding the disruption in insurance are provoking concern at the C-level.  Much of the material equates “large” to “lethargic and slow to react”, while “established” equates to “old and legacy”. In contrast, the material positions small, new and agile companies (David) as extremely innovative and disruptive.  The message is that these “disruptors,” with their new business models and digital capabilities, will make large, established companies irrelevant very soon. Are larger, established insurers destined to be lethargic, slow off the mark, or can they become agile and innovative? It is definitely possible, if the larger, established insurers leverage their strengths and act like a new disruptor. In fact, Chunka Mui’s book, “The New Killer Apps:  How Large Companies Can Out-Innovate Start-ups”, co-authored with Paul Carroll, suggests such a scenario. See also: InsurTech Start-Ups: Friends or Foes?   So, how can established insurers disrupt these “disruptors”? Certainly not by fighting them on their chosen ground and with their weapons of choice. Insurers need to aggressively experiment and learn and accept that failures are part of the process of innovating. They need to leverage the strength of being big, with deep experience and expertise, and combine that with greater agility and innovation. It may even involve cooperative endeavours that could look more like Goliath and David working together than working as dire competitors. For now, however, we’re concerned about refashioning Goliath’s capabilities. So what are the strengths that established insurers can use to forge ahead and disrupt them? Your key strengths are precisely what are mentioned as your weaknesses – “legacy” – the legacy of reputation, the legacy of large customer bases and the legacy of experience and expertise. Those legacies are still highly valuable. It is the legacy mind-set, legacy business models and legacy technology that needs to be reconsidered. Let us peel off a layer from your strengths. The legacy of reputation Whilst this should be a positive for most established insurers, sadly many reputations have been impacted with perceptions of not paying claims. No amount of statistics published by the industry will change the perception, because trust has been impacted. And increasingly, consumers are placing their trust in the voices of other consumers using an array of social media options. Insurers can create a new business model with an underlying digital platform where consumers can easily rate your services openly, and anonymously, if they choose, with the assurance that they will be responded to and engaged with. They can also engage with other customers. This will go hand-in-hand with the creation of communities or interest groups. It will increase trust levels, bridge any trust deficits and help insurers build reputation. Even a slip in service is seen as acceptable if it is transparently acknowledged and acted upon. Doing that builds more trust and reputation. Do more of it and openly.  The legacy of the customer base The customers of today are fickle and loyal to nobody. They will change service providers for the slightest of reasons. How can you get them to be loyal to you? Engaged with you? The customers of today do not engage with “brands” as much as they engage with each other, often through social media. Can you create communities from such customers? Certainly. Communities can revolve around any commonality or interest. Insurers can build communities revolving around areas of interest or even around the insurance type. For example, you could foster a community of insured musicians, passionate about their instruments. They could be part of such communities on the popular social media platforms. Insurers could take advantage of these social media platforms or create a simple one of their own focused on the special tasks involved in caring for these expensive musical treasures. The insurer’s proactive, preventive approach will also help them to keep a low claims ratio. Community-based groups are also less likely to make fraudulent claims because they are “known” within the community. The legacy of experience and expertise. There is a wealth of knowledge and experience in your company, knowledge about customers, about risk, about financial modelling of events, and about the business as a whole. This is likely not being leveraged to the extent it could be. By taking that knowledge and expertise from people’s minds into a system that can leverage it opens up possibilities for the business.  Insurers can automate and configure the business to rapidly adapt to change, using it to grow the business rather than hinder the business. A good example of this is the Majesco Transformation Framework, a path to modernizing without losing the essential aspects of an insurer’s foundation. See also: Getting to 2020 — Defining the Unknown (Part 2)   So, the end goal is to embrace your “Goliath” position while integrating and employing your “David” tools for better competitive strength. To accomplish this you need a robust platform that can support the core of the business with a digital front-end that engages the customer. Robust platforms with back office and front office components, rich in insurance content for products, processes and channels allow the traditional insurers to be big and agile. And as noted in The New Killer Apps, “Yes, small and agile beats big and slow, but big and agile beats anyone — and that combination is now possible.”

This summer, I have attended a number of disruption/innovation insurance industry conferences in London that often, to varying degrees, come down to a debate regarding the extent to which InsurTech startups will be able to come and eat the lunch of industry incumbents. There is little argument that, should the insurance industry fail to better engage with its customers and continue to poorly communicate its social value in protecting people, communities and assets somewhere else will transform what today for many is a “grudge transaction” into a delightful relationship. However, I believe InsurTech does not have to be a zero sum game. I am a proud member of the International Insurance Society (www.internationalinsurance.org) led by Michael Morrissey. In Singapore at the IIS annual conference, a keynote presentation was delivered on the recently formed Insurance Development Forum (IDF). The IDF was formally launched in April and is a collaboration between the insurance industry, the World Bank, the UN and various other institutions. The IDF is chaired by Stephen Catlin, with Rowan Douglas leading the Implementation Committee that includes industry heavyweights such as Dan Glaser, Nikolaus von Bomhard, Greg Case and Inga Beale. Its mission is to incorporate the insurance industry's risk management expertise into governmental disaster risk reduction and to give insurance a larger role in providing resilience to communities all over the world. In a speech at the conference, IDF Chairman Stephen Catlin noted, “We talk about innovation and new products. The reality is we are not even selling well the product we know and love dearly.” I believe the less insular InsurTech community — with its diverse skills sets (often from outside of the insurance industry) — can help insurers start to address the obvious misunderstanding consumers, governments and regulators share of the social value of the insurance product. Sam Maimbo of the World Bank, who sits between deep technical insurance teams and the public sector, noted he spends 70% of his time explaining what the industry has to offer. Addressing this communication gap has parallels to what many InsurTech companies are trying to do in providing better engagement with consumers than is currently provided. There is real opportunity for InsurTech to work with the insurance industry in addressing blockages in the system that, if unlocked, would drive increased demand and grow the overall insurance pie. We are seeing a bit of this in microinsurance with companies like MicroEnsure and Bima providing low-cost insurance solutions to customers that, before recent technological advances, were just not possible. For instance, we need to see more examples of smart contracts founded on blockchain technology. In Africa, it is now possible to buy crop insurance through a mobile device that pays out based on a parametric weather-related trigger through a blockchain-validated third party source that almost eliminates the cost of handling a claim. I am confident we are at the start of this kind of innovation and look forward to seeing more InsurTech companies look to grow the overall industry pie for the benefit of themselves and society as a whole.

Nearly every severe weather season, families in Oklahoma lose their homes — or even their loved ones — to a devastating tornado. Year in and year out, the insurance industry helps the victims rebuild their homes and their lives. When insured Oklahomans replace lost homes, their new homes will be constructed according to existing building codes. When the next devastating tornado hits, the cycle repeats itself. But what if we could stop the cycle? While we can’t stop tornadic activity, we can build homes that are more tornado-resistant. The city of Moore, Okla., a community all too familiar with rebuilding, is committed to doing just that. And I believe the entire state should follow its lead. A Tested Community Moore experienced three significant tornadoes in less than 15 years, including the May 3, 1999, tornado that killed 44 people and caused an estimated $1 billion in damage. The May 8, 2003, tornado caused $370 million in damage, but there was no loss of life. The May 20, 2013, tornado killed 24 people and injured at least 200 more. There, property damage from the 17-mile long swath included an estimated 1,150 destroyed homes; the economic loss was estimated at $2 billion. Breaking the Cycle  Less than a week after the 2013 Moore tornado, a team of professors, scientists, civil engineering students and professional engineers conducted a reconnaissance trip to the disaster zone. Their goal was to investigate the tornadic impact on buildings and homes. They discovered homes recently built to higher-quality construction standards sustained less damage than homes built to a lesser standard. Chris Ramseyer, OU associate professor of civil engineering, later presented the team’s findings to the Moore City Council. Ramseyer recommended the council modify the city’s residential building code to lessen the impact from tornadoes. The changes, Ramseyer said, would make homes significantly stronger while only raising the cost of construction 1-2%. The council voted unanimously to approve the new building code. Embracing Recommendations The new standards require building techniques that allow homes to withstand winds up to 135 miles per hour, rather than the old standard building requirements of 90 miles per hour. The new code requires roof sheathing, hurricane clips or framing anchors, continuous plywood bracing and wind-resistant garage doors. Engineers say a wind-resistant garage door is important because once it is breached, the rest of the home is extremely vulnerable. While EF-5 tornadoes inflict the most catastrophic damage with winds up to 200 mph, 95% of tornadoes are rated EF-2 (or 135 mph) and below. Even in Moore in 2013, 88% of the damage was caused by wind speeds rated EF-2 or lower. If those homes had been built according to Moore’s new building code, 1,012 of 1,150 damaged homes would have withstood the destructive forces experienced that day. It’s Time to Take Action Since 1989, Oklahoma has experienced 1,575 tornadoes that have resulted in almost $32 billion in insured losses. If we assume 88% of those losses fall within the EF-2 or lower wind speed, the loss then falls to $3.84 billion. As we move forward, I will advocate the adoption of the Moore fortified home construction standard as our state standard for new home construction. Insurance policies require that replacement construction meets existing code. If Oklahoma law requires fortified construction techniques, then insurance companies must cover those tougher requirements. More importantly, a stronger home would be a source of comfort to those who have been victimized by tornadoes. For our industry and for our neighbors, it’s a win-win.

Why is this taking so long?! The challenge I hear echoed throughout the insurance industry is, “How do we speed up the claims process for customers?” Insurance companies often face the brunt of the frustrations from stressed-out customers regarding delays with their claims. As we all know, processing those claims takes time and patience to gather information, details, photographs and a myriad of other documentation. Getting the right information and accurate documentation takes even longer. Based on the volume of claims, resources and personnel can become stretched thin quickly. Despite all the efforts within organizations, it’s not uncommon to see claims departments contorting themselves like Gumby to get it all done. Insurance claims are stressful, and relying on customers to reliably and quickly provide information is a challenge — even when it’s to their benefit. The problem becomes exacerbated following natural disasters or claims in geographic locations where companies have little to no footprint and limited resources to document and gather the information needed. In those situations, companies have to reallocate and sometimes relocate resources — which is expensive, time-consuming and a logistical nightmare. See also: What Gig Economy Means for Insurers   Saving time, improving data quality and accuracy are all key components to avoiding customer frustration and increasing customer satisfaction and loyalty. Traditional Challenges Meet Disruptive Solutions Recently, there’s been a lot of handwringing about the “sharing economy” or the “gig economy” and what it means for traditional lines of business, workers and whether it will completely transform the workplace as we know it. As Tony Canas shared in his Insurance Thought Leadership piece, “What Will Be the Uber of Insurance?”, the gig economy is hardly the end of the world — and the insurance industry is probably due for some disruption. What a number of traditional lines of business are beginning to discover is that the gig economy presents an opportunity to leverage crowdsourcing to solve challenges and inefficiencies and even spark innovation within their own organizations. Target and Instacart, Ford and Lyft, are both great examples of how large, traditional verticals are finding ways to integrate the gig economy into new products and services to attract and keep customers while increasing the bottom line. Now, let's go back to one of insurance’s greatest challenges: saving time and improving accuracy in the claims process, particularly when it comes to getting information such as photographs, records, police reports and inspections. These tasks sometimes feel like they can go on forever with a single claim, as companies try to coordinate logistics with policyholders. What if there was an Uber for insurers? A service that could dispatch an objective third party with a smartphone to quickly take pictures and gather exactly the information needed in the claims process almost immediately? There is. The gig economy and the crowdsourcing model provide a nimbleness and speed that are often sacrificed or buried alive in large enterprise organizations. See also: The Gig Economy Is Alive and Growing   Turning to the gig economy and its on-demand workforce is generating economic benefits and creating true efficiency. We’ve witnessed the process being replicated in companies both large and small and in a variety of categories. I’m continually inspired by the creativity of entrepreneurs and how they’ve found inspirational ways to apply crowdsourcing. From crowdfunding, ridesharing, coworking, delivery services (even pet Airbnb), the gig economy marketplace is homing in on specific consumer and business needs and is delivering. It can do the same for claims, so we can all stop being asked why they are taking so long.

When I was a kid growing up in Wisconsin, arm wrestling was a big deal. I'm not exactly certain why, but my guess is that it was because the winters in Wisconsin are really long and really cold. I think everyone ran out of things to do at the local tavern — so, arm wrestling it was! In my career in the insurance industry, I have seen a lot of arm wrestling matches. Perhaps not functional arm wrestling, but arm wrestling in spirit. One of the longest-standing reasons for an arm wrestling match has been over the topic of who owns the customer and the customer experience. In some instances, departments such as marketing and, more recently, e-commerce feel they own the customer experience — and they are going to protect that turf. I have witnessed situations where IT was vying for ownership of the customer experience because it could install software that would make the customer experience appealing and functional — in one way or another. I have also seen a good number of departments madly running away from a customer experience ownership arm wrestling match. Customer experience can be a really scary topic, and having it weigh into your performance appraisal might be daunting for many. See also: Payoff From Great Customer Experience?   Recently, a number of insurers have realized that ownership of customer experience isn’t a department issue; it’s a person issue. A person needs to be responsible. To make it a top priority — which it absolutely should be — the responsible person needs to be at the upper level of the organization, within the C-suite or at least directly reporting there. Responsibility is a good thing, but that’s not the whole success factor. To truly institutionalize customer experience, organizing around it is imperative. A recent press release involving Farmers Insurance organizational changes brought the theme of this blog into clear focus. The reporter understood the issue; The title of the article was “Farmers shuffles execs to improve customer experience.” Now, there isn’t a magical formula for customer experience organizational structures. Farmers elected to place the responsibility for customer experience ownership with two people: the newly appointed personal lines chief product officer and the person assuming the role of head of service operations for the company, who reported to the COO. The whole point is that an insurer needs to have a vision and a strategic goal for customer experience and then enforce it through its organizational structure with an accountable person or persons. See also: Want to Enhance Your Customer Experience?   While I don’t live in Wisconsin any more, I'm pretty sure arm wrestling is still a big deal. But when it comes to customer experience, insurers need absolute clarity on what the corporate direction is, not arm wrestling — and sound organizational structure around customer experience will make that happen.

Much has been discussed as to the coming disruption of the insurance industry in emerging markets. While I believe that it is happening, I also believe that, contrary to the common held view of many of my peers, building a disruptive insurance platform in emerging markets is going to be a marathon and not a sprint. I do not claim to have all of the answers. In fact, we are not even close to having most of the answers, but we have learned a few things along the way. While many are quick to predict the demise of the traditional broker, I believe that the evolution of disruption within the insurance market will be one of natural selection. There are many highly profitable brokers in these markets that have a deep understanding of their customer, regulatory issues, market trends and simple common sense. Most are family-owned, with a new generation of family members anxious to take the helm. And while most of these brokers are not tech-savvy and certainly do not have regional or global aspirations, the ones of interest are forward-thinking and anxious to take on a new challenge as they clearly see how the winds of change are blowing. I see these brokers as natural partners, and by acquiring key brokers in each market the aspiring disrupter will gain immediate market share, revenues, EBITDA, customer and databases, infrastructure (yes, customers still like to talk on the phone), licenses and management talent. With those beachheads in place, you will be able to take the next step, which is to apply technology to the existing base. This can start with the basics; consolidating databases, cross-selling, upselling, retention, dashboard analytics moving ever further up the food chain to digital marketing, big data and someday the mysterious artificial intelligence. All of this creates short-term value, as you will see immediate increases in CAGR, EBITDA, retention rates and other key metrics, but that doesn't change the perception of insurance for the consumer. In simple terms, these changes are not disruptive and at the end of the day are boring for customers. See also: An Eruption in Disruptive InsurTech?   So what will be the secret sauce? The carriers are an integral part of the ultimate disruption process, as they will work with the broker and consumer to develop the transformational products that the new consumer is going to require. This will be a key part of the challenge, as this will require a radically new approach to product development and, of course, dissemination. Products will include temporary auto insurance, school insurance for books, computers and other needs, home office insurance (do you know how many new consumers work out of their home) and unique vacation insurance. These products will drive real value for shareholders, while at the same time we are ultimately improving the lives of our customers. I am convinced that one of the key secret ingredients for creating disruption within the emerging market insurance industry will revolve around product bundling and the great feeling you get when you believe that you just received a gift. It is also about being part of a contest and, yes, winning a prize. By partnering with leading manufacturers of cosmetics, sporting goods, automotive, school supplies, and fashion apparel, the aspiring disrupter can bundle these products with the underlying insurance product that their customer is buying and enjoys buying. In the most basic form, when our customer buys travel insurance they will receive free sun care products. If they buy school insurance, they receive free school supplies. It is a win-win for the product supplier, the customer and the insurer. If you think this is fluff, just ask the new consumers who are watching every penny in their budget. But that is not enough, as we want a long-term relationship with our customer. So in addition to all of the above we are sponsoring online contests. To promote scholastic achievement and safe driving, we will soon have one for the zaniest insurance videos, i.e. my homework was actually eaten by an iguana or my car was crushed by an elephant. All of this is meant to build a very real bond with the consumer, improving their lives along the way. The evolution of disruption in emerging markets has been interesting to observe, as the “the rage of the day” began more than two years ago with the aggregator model. Numerous well-funded ventures launched online insurance websites in Brazil, Argentina, Colombia, Thailand and many other markets with a few common traits. The ventures were not disruptive, they had no existing customer base and they had no real strategy for interacting with the new consumer. The majority of these online insurance portals were "aggregators," providing real-time or in some cases faster-time quotes from multiple insurance providers. The sites were often difficult to navigate and crowded and typically lacked originality. Soon, the novelty began to wear off as investors realized that "Build it and they will come" was not going to happen. Disruption became the flavor of the day, but most investors and operators didn't really grasp or even care what the term meant. The overriding concern was "getting traffic to the site," and, while digital marketing strategies were developed and bandied about, the fallback position quickly became traditional media. In one case, the dominant online insurance broker in Brazil was told by its investors that it would not receive the next tranche of capital unless it dramatically increased spending on TV, print and radio advertising. Yes, the media of the past had become today's agent for disruption. While spending millions of dollars on traditional media for insurance is still a fact of life in many mature markets, it can hardly be called disruptive or for that matter even efficient. The next phase of evolution came in the form of "digital marketing" and mobile apps. As smart phones typically outnumber the average population in most emerging market countries (in Brazil, there are an estimated 280 million smartphones for a population of 200 million people), the logic stands that this is the best way to reach the consumer. But dig a little deeper and ask yourself a very simple question: How important is insurance in your day-to-day life? For all of us who are selling, packaging or creating insurance products, insurance is the center of the universe, but for the average consumer insurance rates a two or a three on a scale of one to 10, if that. See also: Pokémon Go Highlights Disruptive Technology  While the "next wave" was unfolding, other issues became noticeable. Many of the "disrupters" were country-centric, with no real plan or strategy for regional or global expansion, which seemed odd. After all, if you are planning to disrupt insurance in Chile, wouldn't you want to consider disrupting insurance globally, or at least in somewhat similar countries in Latin America? Some products, such as auto insurance, were seen as commodities that were as sexy to the consumer as a trip to the dentist, so the market screamed like banshees for new products; pet insurance, travel insurance, smartphone insurance, hotel insurance, sport insurance, bike insurance....the list goes on. We are increasingly living in an age of data overload, and we need to be very discerning as to the relationship we develop with the customer. We also need to be discerning about local markets. In China, online insurance companies popped up overnight, and many of them reached wild valuations by just selling a single product, like travel insurance. But, in Brazil, the market is much more mature, and travel insurance is about as new as samba. With a robust online presence, massive investments in traditional media, digital marketing, mobile apps and new products, things were sure to get disruptive, right? Wrong, as consumers were still using traditional brokers, and insurance was still not on their top 10 list. So what next? Could it be the vaunted but yet indefinable artificial intelligence? Within the span of two short years, we have moved from science fiction to science fact. What if, through AI, we could predict when our customer would have their next child, next house, car, divorce, marriage and even death? This would be real disruption, as we would be able to predict consumer behavior and in doing so create a "cradle to grave" lifecycle of products, sales, conversion and retention. The problem, of course, is that AI is still in its infancy, as there are very few 2001 Space Odyssey HAL computers in the world today. Even if we had mastered this technology, there is still a larger question of how to use it and deploy it. This question will inevitably be answered, but for now we still face the fundamental challenge of taking a very boring product and transforming it into something consumers actually get excited about. We also need to ask ourselves how we would scale across multiple countries in a relatively short time. That brings us to the end of our story, or, rather, the beginning. Disruption is coming to the insurance industry, and it will find fertile ground in the fast-growing emerging markets and the new consumer. The savvy insurance disrupter will gain massive amounts of data that will have value for a wide spectrum of partners.

April Fools' Day is just one day a year, but there are common mistakes an insight leader is prone to (and that could end up making him look like a fool) all year 'round. This isn’t surprising when you consider the breadth of responsibility within the customer insight leadership role. Such leaders have multi-disciplinary technical teams to manage and an increasing demand across from areas of modern business to improve decisions and performance. Like most of the lessons I’ve learned over the years, the following has come from getting it wrong myself first. So, there’s no need for any of my clients or colleagues to feel embarrassed. Beyond the day of pitfalls for the gullible, then, here are four common — but foolish — mistakes I see customer insight leaders still making. 1. Leaving data access control with IT Data ownership and data management are not the sexiest responsibilities up for grabs in today’s organizations. To many, they appear to come with a much greater risk of failure or at least blame than any potential reward. However, this work being done well is often one of the highest predictors of insight team productivity. Ask any data scientist or customer analyst what they spend most of their time doing, and the consistent answer (over my years of asking such questions) is "data prep." Most of the time, significant work is needed to bring together the data needed and explore, clean and categorize it for any meaningful analysis. But, given the negative PR and the historical role of IT in this domain, it can be tempting for insight leaders to leave control of data management with IT. In my experience, this is almost always a mistake. Over decades (of often being unfairly blamed for anything that went wrong and that involved technology), IT teams and processes have evolved to minimize risk. Such a controlled (and, at times, bureaucratic) approach is normally too slow and too restrictive for the demands of an insight team. I’ve lost count of how many capable but frustrated analysts I have met over the years who were prevented from making a difference because of lack of access to the data needed. Sometimes the rationale is data protection, security or even operational performance. At the root, customer insight or data science work is, by nature, exploratory and innovative, and it requires a flexibility and level of risk that run counter to IT processes. See also: 3 Skills Needed for Customer Insight To avoid this foolish mistake, I recommend insight leaders take on the responsibility for customer data management. Owning flexible provision of the data needed for analysis, modeling, research and database marketing is worth the headaches that come with the territory. Plus, the other issues that come to light are well worth insight leaders knowing well — whether they be data quality, data protection, or something regulation- or technology-related. Data leadership is often an opportunity to see potential issues for insight generation and deployment much earlier in the lifecycle. 2. Underestimating the cultural work needed to bring a team together Data scientists and research managers are very different people. Data analysts, working on data quality challenges, see the world very differently from database marketing analysts, who are focused on lead performance and the next urgent campaign. It can be all too easy for a new insight leader to underestimate these cultural differences. Over more than 13 years, I had the challenge and pleasure of building insight teams from scratch and integrating previously disparate technical functions into an insight department. Although team structures, processes and workflows can take considerable management time to get working well, I’ve found they are easy compared with the cultural transformation needed. This should not be a surprise. Most research teams have come from humanities backgrounds and are staffed by "people people" who are interested in understanding others better. Most data science or analysis teams have come from math and science backgrounds and are staffed by "numbers people" who are interested in solving hard problems. Most database marketing teams have come from marketing or sales backgrounds and are more likely to be motivated by business success and interested in proving what works and makes money. Most data management teams have come from IT or finance backgrounds and are staffed by those with strong attention to detail, who are motivated by technical and coding skills and who want to be left alone to get on with their work. As you can see, these types of people are not natural bedfellows. Although their technical expertise is powerfully complementary, they tend to approach each other with natural skepticism. Prejudices that are common in society and education often fuel both misunderstanding and a reluctance to give up any local control to collaborate more. Many math and science grads have grown up poking fun at "fluffy" humanities students. Conversely, those with a humanities background and strong interest in society can dismiss data and analytics folk as "geeky" and as removed from the real world. So, how can an insight leader avoid this foolish oversight and lead cultural change? There really is no shortcut to listening to your teams, understanding their aspirations/frustrations/potential and sharing what you learn to foster greater understanding. As well as needing to be a translator (between technical and business languages), the insight leader also needs to be a bridge builder. It’s worth remembering classic leadership lessons such as "you get what you measure/reward," and "catch people doing something right." So, ensure you set objectives that require cooperation and recognize those who pioneer collaboration across the divides. It’s also important to watch your language as a leader — it should be inclusive and value all four technical disciplines. 3. Avoiding commercial targets because of lack of control Most of us want to feel in control. It’s a natural human response to avoid creating a situation where we cannot control the outcome and are dependent on others. However, that is often the route to greater productivity and success in business. The myth still peddled by testosterone-fueled motivational speakers is that you are the master of your own destiny and can achieve whatever you want. Collaboration, coordination and communication are key to making progress in the increasingly complex networks in today’s corporations. For that reason, many executives are looking for those future leaders who have a willingness to partner with others and to take risks to do so. Perhaps it is particularly the analytical mindset of many insight leaders that makes them painfully aware of how often a target or objective is beyond their control. When a boss or opportunity suggests taking on a commercial target, what strikes many of us (at first) is the implied dependency on other areas to deliver, if we are to achieve it. See also: The Science (and Art) of Data, Part 1 For that reasons, many people stress wanting objectives that "measure what they can control’." Citing greater accountability and transparency for their own performance can be an exercise in missing the point. In business life, what customer insights can produce on their own is a far-smaller prize than what can be achieved commercially by working with other teams. Many years ago, I learned the benefit of "stepping forward" to own sales or marketing targets as an insight leader. Although many of the levers might be beyond my control, the credibility and influencing needed were not. Many insight leaders find they have greater influence with their leaders in other functions after taking such a risk. Being seen to be "in this together" or "on the spike" can help break down cultural barriers that have previously prevented insights being acted upon and that generate more profit or improve more customers’ experiences. 4. Not letting something fail, even though it's broken A common gripe I hear from insight leaders (during coaching or mentoring sessions) is a feeling of suffering for "not dropping the ball." Many are working with disconnected data, antiquated systems, under-resourced teams and insufficient budgets. Frankly, that is the norm. However, as aware as they are of how much their work matters (because of commercial, customer and colleague impact), they strive to cope. Sometimes, for years, they and their teams work to manually achieve superhuman delivery from sub-human resources. But there is a sting in the tale of this heroic success. Because they continue to "keep the show on the road," their pleas for more funds, new systems, more staff or data projects often fall on deaf ears. From a senior executive perspective (used to all the reports needing more), the evidence presents another "if it ain’t broke, don’t fix it” scenario. They may empathize with their insight leader but also know they are managing to still deliver what’s needed. So, requests get de-prioritized. In some organizations, this frustration can turn to resentment when insight leaders see other more politically savvy leaders get investment instead. Why were they more deserving? They just play the game! Well, perhaps its time for insight leaders to wake up and smell the coffee. Many years ago, I learned you have to choose your failures as well as your successes. With the same caution with which you choose any battles in business, it’s worth insight leaders carefully planning when and where to "drop the ball." How do you avoid this foolish mistake? Once again, it comes back to risk taking. Let something fail. Drop that ball when planned. Hold your nerve. If you’ve built a good reputation, chances are it will also increase the priority of getting the investment or change you need. You might just be your own worst enemy by masking the problem! Phew, a longer post than I normally publish here or on Customer Insight Leader. But I hope those leadership thoughts helped. Please feel free to share your own insights. Meanwhile, be kind to yourself today. We can all be foolish at times….

The main problem that blockchain solves results from the fact that computer databases simply cannot talk to each other without a layer of expensive fault-prone human administration or bureaucratic central authority controlling every node. Blockchain technology, on the other hand, is a single, decentralized database managed by software and shared by multiple users, without any third party authority. This makes processing transactions less costly and less error-prone. This software enables process efficiency because new links can form as needed, and improves organizational efficiency because no management gatekeepers are needed. The applicability of blockchains may include everywhere that many people may want to interact with a computer database. It is easy to imagine a tremendous breadth and depth of potential applications and markets. Centralization The traditional way to enable databases to communicate with each other is to consolidate and combine them into a single database, hoping that enough commonality would exist to patch them together. This approach is typical of mergers and acquisitions of corporations where two somewhat similar entities combine their data under a central authority. Efficiencies are gained in scale and elimination of redundancy. Unfortunately, centralization can also lead to inefficiencies such as top-heavy hierarchy, monopoly, obfuscation, stagnation and vulnerability to external shocks. Failures would often trigger blanket legislation and government regulations. Meanwhile, the original problem remains; how do these new mega databases communicate with other mega databases? See also: How Blockchain Will Reorganize Society   Decentralization The other way to eliminate intermediaries and enable data to be shared between organizations is for everyone to share the same database. Multiple writers can retrieve and populate data simultaneously with no controls, consensus or centralized authority. Natural organic links would form, and operations would become faster, cheaper and easier to perform and maintain. The network effect can take hold where the value of the network would grow exponentially. Unfortunately, there would be no way to stop a person from cheating another person, or going back to change the conditions of a contract, or giving himself a raise, or double spending a unit of account, etc. For decentralized databases, these are precisely the problems that blockchain solves. Before Bitcoin, if a person sent a contract over email, each party would hold an identical copy that could be easily manipulated. After Bitcoin, a person can send a contract electronically, and the receiving party would hold the only valid copy. While this may sound trivial at first, it is extraordinarily difficult for a computer to do. But it would allow computers to perform some of the functions that administrators routinely perform today at nearly every interaction with a computer. Not unlike what happened with mechanization in the last century, once achieved, the software-managed architecture will be faster, more reliable and cheaper while the marginal cost of adding additional capacity approaches zero. Centralized databases scale at the speed of bureaucracy. Blockchain may scale up to handle large and complex transactions or scale down to accommodate billions of micro-transaction with little difference in operations cost. Also like what happened with mechanization, society will certainly reorganize around these new forms of value creation and exchange. This is already evident with the extraordinary amount of venture and investment capital and creative new decentralized autonomous organizations (DAOs) pouring into blockchain space. See also: Why Insurers Caught the Blockchain Bug   Blockchain technology makes business cases that may never have been viable become brilliantly viable today. To use an engineering example, the invention of the hydrostatic wheel bearing eliminated enough mechanical friction from a steam locomotive that it could become a viable engine of economic growth. Likewise, blockchain technology holds the potential to eliminate a tremendous amount of friction from everyday transactions and agreements. For anyone reading this article while standing in line at the DMV, that is a problem that deserves to be solved. The innovation has just begun. (Adapted from; Insurance: The Highest and Best Use of Blockchain technology, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf)

Insurance M&A markets remained active in the first half of 2016 despite the lack of mega deals. The largest transaction this year was BB&T Corp. acquiring wholesale insurance broker Swett & Crawford for $500 million in cash from London-based Cooper Gay Swett & Crawford. On a relative basis, the announced deal activity and value declined compared with 2015, where we saw a record number of transactions in the sector. 2015 was a transformative year in the insurance sector, with several mega deals, including ACE Ltd.'s acquisition of Chubb Corp. for $28 billion, Tokio Marine acquiring HCC Insurance Holdings for $7.5 billion and Meiji Yasuda Life acquiring StanCorp Financial for $5 billion.

• Deal volume remains strong, with 232 announced deals in 1H 2106, 87% of which were composed of insurance brokers.
• There was a slight decline in transaction multiples with the median price-to-book multiple for insurance deals at 1.8x vs. 1.6x in 2H 2015.
• There were no mega deals (deals more than $1 billion) announced during 1H 2016. The largest deal announced was $500 million.

Highlights of 1H 2016 deal activity Insurance Activity Remains High: U.S. insurance deal volume had been steadily increasing since 2013. While volume remained high in 1H 2016, it has declined compared with the same period in 2015. Announced deal values in 1H 2016 were nowhere close to the record levels seen in 2015. Significant Transactions: BB&T announced its acquisition of Swett & Crawford Group, growing its wholesale brokerage business in the U.S. Massachusetts Mutual announced its acquisition of MetLife’s U.S. retail adviser force, allowing the expansion of its U.S. client base. MetLife chose to divest in response to the looming Department of Labor fiduciary rule. massa Key Trends and Insights Sub-sectors highlights

• The persistent low interest rate environment has weighed on life insurers’ investment portfolios. Furthermore, the unprecedented U.K. vote to break away from the EU increased the volatility of both the U.S. dollar and the euro value relative to the pound, and it decreased the likelihood of near-term rate increases by the Fed. Last year, major deals involved the largest Chinese and Japanese life insurers venturing out of their home markets. While Asian investors still have an active interest in expanding, regulatory uncertainty remains for Chinese buyers pending the resolution of the announced Fidelity & Guaranty Life acquisition. We expect momentum to pick up from small to medium-sized companies, as they are focused on building much-needed scale and the need to comply with enhanced regulations.
• The insurance broker segment continues to be the most active in terms of deal volume. This year, we have seen the five most active regional brokers to be Hub International, AssuredPartners, Arthur J. Gallagher, Confie Seguros California and Acrisure.

Conclusion and Outlook We expect activity to intensify for the remaining part of the year as insurers are focused on the disruption to their businesses because of technology, adapting to an evolving regulatory landscape and an uncertain macroeconomic environment.

• Technology: According to the 2016 PwC Global FinTech Survey, 21% of insurance business is at risk of being lost to standalone InsurTech companies within five years. The rise of shared mobility, the “gig” economy, robotics and sensors are disrupting several areas of insurance. Incumbents have been responding by direct investment in startups or by forming joint ventures to stay competitive. Recent examples include ACE’s investment in CoverHound and Marsh’s acquisition of Dovetail Insurance.
• Macroeconomic environment: The global market volatility, persistent low interest rates and the uncertainty around Brexit continue to constrain insurers’ revenues and profitability. Life insurers have used both divestitures and acquisitions to manage the damaging impacts of the low-return environment and transform their business models. There is renewed interest in diversifying asset management capabilities by way of acquisitions.
• Regulatory environment and shareholder activism: Increased scrutiny and uncertainty have heavily influenced insurers’ business models and strategies, forcing many to exit businesses. The recent DOL fiduciary rule continues to be an obstacle for life/annuity insurers, as it can cause insurers that use exclusive agents to evaluate their product offerings and firm structure. Recent examples include MetLife shedding its U.S. adviser unit to Massachusetts Mutual Life Insurance and AIG selling its Advisor Group to Lightyear Capital and PSP Investments. AIG continues to simplify its organization, in part because of the aggressive stance from activist investor Carl Icahn.
• Foreign entrants: Asian insurers — specifically Japanese insurers looking for growth and Chinese insurers seeking diversification — have a continued interest in U.S. and European insurers.
• Private equity/hedge funds/family offices: Non-traditional firms have maintained strong interest in runoff, long-tail liabilities. They have expanded beyond insurance brokers and the annuities business to include other sectors within insurance, including managing general agents.

About the data: The information presented in this report is an analysis of deals in the insurance industry (excluding managed care) where the target company, the target ultimate parent company was located in the U.S. Deal information was sourced from S&P Global Market Intelligence and includes deals for which targets are: Insurance underwriter and insurance broker (multiline, property and casualty, life and health, title, mortgage guaranty and financial guaranty). Certain adjustments have been made to the information to exclude transactions that are not specific to the sector or incorporate relevant transactions that were omitted from the indicated mid industry codes. This analysis includes all individual mergers, acquisitions and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations and acquisitions announced between Jan. 1, 2014 and June 30, 2016, with a deal status of completion, definitive agreement or non-binding letter of intent. Percentages and values are rounded to the nearest whole number, which may result in minor differences when summing totals. This article was also written by Mark Friedman, Christopher Gaskin and Ritendra Roy.

InsurTech is rapidly growing and evolving, with a wide array of new startups: from technology companies serving the industry, to new distribution and insurance companies meeting new customer and risk needs. To quote a recent Majesco white paper, “Greenfields, Startups and Incubators … Innovation in Insurance,” “The number of insurance-related startups varies widely across different sources: Venture Scanner tracks 535 companies involved in the ecosystem (which includes investment companies, reinsurers and others), Celent puts the range at 400-1,500 depending on the source, and CB Insights reported in March 2016 that they were tracking over 135 startups in Insurtech across 13 categories.” These organizations are, as a group, innovative, creative, surprising and competitive. Many insurers are either funding startups, launching their own startups or discussing possible collaborations with startups. Some startups have a great idea but are a few technological steps away from being able to carry it out and have an agile, innovative back end system. Solution Shopping for Insurance Startups In a way, the whole market for startups could be compared to shopping for shoes. There are several ways you can buy shoes. You can order them online. You can get fitted at a retail store. With a little practice and some knowledge, you can even make your own shoes. You may only need a simple sandal. You may need something as complex as a hiking boot. The unifying element in shoe shopping is that most people buy their shoes because they need them, want to wear them right away and don’t want to have to go through the expense and time to make their own. They seek out a trusted brand, and they purchase through a trusted source. For insurance startups, it is important to have a partner that has an agile, innovative solution that can rapidly get your ideas to market without using a large portion of your seed or launch capital. If the partner has a ready-to-use cloud solution that can be deployed quickly in any situation (from the simple sandal to the sophisticated boot), then the solution will fit now, during launch and in the future, during growth. Speed to Value for a Rapid Launch Startups aren’t just launching systems; they are launching a business inclusive of products, services and more. In today’s new InsurTech world, startup costs often roll into product development, branding, distribution channels, user experience, filings and talent acquisition. But startups can’t afford to skimp on a having a front office and back office insurance solution with the content, capabilities, flexibility and scale needed today and, potentially, in the future. See also: How to Plant in the Greenfields So what options should be considered? At the top of the list, startups should consider a partner with a robust cloud insurance platform as a launch pad for their innovative business plan that provides a variable cost model with pay-as-you-go that can deliver speed to value. Not only are traditional technology expenses reduced or eliminated but, more importantly, a cloud insurance platform provides startups:

• The ability to leverage best practices to establish business operations;
• Ready-to-use insurance content to meet basic regulatory needs;
• Support distribution channel flexibility and expansion via a flexible front-end digital platform;
• Operational efficiency and economies of scale;
• Lower total cost of ownership; and
• The ability for capital optimization of business growth.

Most importantly, startups should seek an out-of-the-box, repeatable, scalable cloud platform that supports launch through growth with a partner that assumes single accountability. Selecting a Trusted Partner Startups need a solid partner that understands technology and insurance from a high level — down to the details of products, rules and code. They need a partner with experience to help startups from initiation and launch through growth. They should seek a partner with a focus on innovation through integration of new technology capabilities provided by them or their trusted partners. In today’s world, some system traits become critical attributes. “Ready-to-launch,” “pre-built,” “easily adapted to change” and “plug-and-play” are requirements. For startups, this is crucial, especially to product development launch and growth. From product design to quote, service and claims, an insurance platform must be able to address any or all parts of the insurance value chain. A trusted partner will be knowledgeable about common startup questions such as: “How do we deal with service?”; “How do we approach claims?”; “How do we integrate alternative distribution channels?”; and “How do we ensure effective customer engagement for our products and services?” See also: Innovation — or Just Innovative Thinking?   When growth happens, startups also know how to scale up to meet demand, add capability where needed and continually keep an eye on the rapidly evolving technologies that will make a competitive difference. Involving Your Trusted Partner Early in the Process Insurance startups need early access to industry expertise and experience. Traditionally, established insurance technology partners have a methodical (and sometimes slow) process of learning about a company’s technology history. There is often a great deal of time devoted to coming up to speed on how we do business. Call it a learning curve or relationship building — the partner works at fitting its teams properly into the customer process. A startup insurer has a unique opportunity to capitalize on involving a trusted  partner early, collaborating with the startup to create something new and unique. An experienced partner can bring expertise, best practices, ideas and more to the table. This will give the new startup additional product advantages and superior operational differentiation. This is especially true regarding process automation. Rules-based processes and deep insurance capabilities can be eye-opening to startups that may have never considered the full realm of possibility. An experienced partner thinks 10 steps ahead. The partner knows why certain roads of development are dead-ends and others are preparatory measures to ensure a robust, exciting future. These are the nuggets of knowledge that will give the startup real agility and value as they grow. See also: The Start-Ups That Are Innovating in Life   Finding success in solution shopping, then, is more than finding an out-of-the-box solution. It is more a matter of finding a trusted partner with experience, expertise and a flexible cloud-based platform that can provide a rapid launch with speed to value from initiation and through launch and growth.