If you hear employees talking about spending their stardust and candies, chances are they’re caught up in the latest pop culture fixation: Pokémon Go. The mobile phone game sensation has fans roaming the country with their handhelds out to capture the “Pocket Monsters” scattered virtually throughout the real world. The kid in me chuckles at this innovative use of augmented reality (AR) technology. But my cyber risk side looks at AR and sees potential issues involving malware, privacy, data disclosure and employee safety. Real-World Risks Computer and online games become instant targets for malware, through such things as fake and cracked versions in app stores. Hackers could gain control over a phone and thus a wealth of data about its user. For companies with bring your own device (BYOD) programs, enterprise email accounts and other data could be exposed. See also: Better Way to Assess Cyber Risks? Of course, BYOD risks are not limited to Pokémon Go. For example, sensitive information can be exposed through employees’ social media postings and other activities.  But apps that are addictive and seemingly innocent can blind users to the risks of downloading. AR technology combines elements of the digital and physical worlds into a single view, allowing data, text or images to be superimposed on a live video feed. In Pokémon Go, AR allows for the game map to align with a real-world map and players to find and even photograph their monsters in physical locations. What if a Pokémon is located inside your company’s office? If a user shares a photo or screenshot of such a location, it poses a risk of inadvertent loss of sensitive company or customer information. And there are issues around invasion of privacy for people/places that don’t want to be involved in the game. Managing Risk As surely as Pikachu evolve into Raichu, technology like AR will morph and bring new risks. Businesses may try to block or limit employees’ access to AR and similar technology, but that may only provide temporary relief before the next threat emerges. See also: Cyber Risk: The Expanding Threat   So as with all cyber risks, when it comes to Pokémon Go, organizations should make sure they don’t focus only on prevention. Among the steps to bolster response and recovery, businesses can:

• Educate employees about the risks.
• Conduct regular cyber risk assessments and audits to identify threats and assets at risk.
• Develop and test disaster recovery, business continuity and incident response plans in conjunction with law enforcement, regulators and others.
• Purchase cyber insurance to deal with the inevitable risks that slip through the cracks.

AR and other disruptive technologies are here to stay, and promise to benefit companies and consumers. Risk professionals will need to be nimble as they manage the accompanying risks.

Certainly some forms of insurance like health, home, auto, life or long-term disability coverage are probably necessary components to your wellbeing and security. But many people fall victim to fear or slick salesmanship to be convinced of the need to purchase some kind of special insurance coverage that is redundant, unnecessary, impractical or downright wasteful. It sounds good at the time, but in reality many insurance policies cost too much, have an unrealistic deductible or are simply frivolous coverage. You have to ask yourself in each case what the loss ratio is based upon each dollar of premium versus dollars paid for claims. For example, various kinds of credit insurance typically pay out 10 to 15 cents on the dollar versus auto insurance that typically pays out 80% to 85% of premium dollars. See also: The Most Effective Insurance Policy Here are my picks for the top 10 most useless insurance policies in alphabetic order:

• Accidental Death Insurance

If you need life insurance, buy an amount that you deem necessary to cover you for all the ways you could die accidentally whether it’s by accident, disease, assault or old age. Accidental death insurance is often referred to as Las Vegas coverage – like a bonus to your heirs if you die in car crashes. Your heirs may have a civil negligence lawsuit to pursue in such cases anyway.

• Cancer Insurance

Dreaded disease insurance policies like this cover you only if you die from one or more specific diseases. This is like playing specific numbers on the roulette wheel. Buy a term life insurance policy that covers you for the widest range in causes of death.

• Cell Phone Coverage

New cell phones come with a manufacturer’s warranty covering defects or malfunctions. Consumer groups don’t recommend buying this monthly supplemental coverage due to consumer complaints including “fine print” exclusions, hidden deductible fees and refurbished replacement phones.

• Credit Card Insurance

By law, most credit card fraud losses are capped at $50 per card with prompt notification, and most banks or credit unions have a zero-liability limit of stolen credit cards. Review your monthly statements regularly. Furthermore, the insurance schemes that offer to pay off of your credit card “balance owed” due to disability or death is better avoided, in favor of a traditional long term disability or life insurance policy.

• Extended Warranties

These “policies” are often sold as a scare tactic that typically provides additional commissions or spiffs to retail sales people. Who can remember which items you bought such coverage for and until when? Why buy an extended warranty from a reputable retailer or manufacturer that should provide a reasonable warranty to begin with? Moreover, with the pace of technological changes, most consumer products, whether appliances or electronics, are greatly improved or less expensive after two to three years.

• Homeowner’s Scheduled Property Insurance

Review your homeowner’s insurance policy carefully as most policies include overall personal property losses in an amount shown as a percentage of the value of the insured home. Singling out valuables as scheduled items, such as jewelry or fine art, typically requires appraisal and documentation, to be worthwhile. Furthermore, such items are often underinsured over time due to the fact you have to periodically purchase higher specific coverage limits for each scheduled item that may appreciate in value.

• Identity Theft Insurance

Federal protections can leave you paying little to nothing if your identity is stolen. Regulators have slapped the ID protection industry several times for deceptive marketing practices. Furthermore, most stolen name, birth dates or Social Security numbers are used to open new credit card accounts or to file a bogus tax return in your name to get a refund. 80% of stolen identities involve credit card fraud or check forgery. See also: Insurance at a Tipping Point (Part 1)

• Mortgage Insurance

Private mortgage insurance uses the same sales approach as credit card or dreaded disease life insurance policies. Unless PMI is required by the lender (when you put less than 20% down on purchase), buy adequate term life insurance to cover these kinds of financial obligations. The only exceptions may occur if you are unable to obtain life insurance due to age or illness and want to ensure that your property’s mortgage is paid off at your death.

• Pet Insurance

This often cost more overall than it will pay out due to various terms and conditions as well as exclusions, including inconveniently located designated veterinarians or clinics. Explore any nearby veterinarian universities as well for excellent low-cost medical treatment options.

• Rental Car Insurance

In most cases, this coverage is provided by other sources such as your own auto insurance carrier, your credit card company or your employer, if you are on business.

What’s a great, differentiated customer experience really worth to an insurance carrier? It’s a vexing question for the insurance industry, where the idea of investing in a better customer experience is often met with skepticism. Carriers may publicly affirm the importance of customer-centricity, but many in the C-suite privately question the value of customer experience differentiation, unsure of the financial return it really delivers. In an industry where actuaries are kings and numbers rule the day, the seemingly “soft” benefits of a great customer experience don’t carry much weight. As a result, carriers continue to subject their customers to complex purchase processes, unintelligible policy documents, cluttered websites, dizzying 800-line menus, disempowered service representatives, confusing claims communications and archaic business practices. The irony is that the benefits of a better customer experience are far from soft—it’s just that companies aren’t well-versed in the cross-silo economic calculus needed to measure them. For example, the benefits of a plain-language policy summary from an underwriter may only manifest themselves downstream, by reducing customer confusion and preempting phone calls to a service center. What many numbers-oriented insurance executives seem to crave is quantifiable evidence that, at least at a macro level, a great customer experience really does pay dividends. And now they have that evidence. Quantifying the Impact of Customer Experience To help industry leaders understand the overarching influence of a great customer experience (as well as a poor one), my firm aimed to elevate the dialogue and avoid getting mired, at least for a moment, in the cost/benefit calculations of specific types of improvement projects. We sought to illustrate the macro impact of an effective customer experience strategy by describing it in a language that every insurance executive should understand: shareholder value. So we sharpened our pencils and compiled years of data from what’s arguably the most well-regarded source of insurance carrier customer experience rankings: J.D. Power and Associates’ annual Insurance Satisfaction Studies. See also: How to Redesign Customer Experience Our approach was simple: We calculated the cumulative total stock returns for two model portfolios, comprised of the Top 5 (“Leaders”) and Bottom 5 (“Laggards”) publicly traded companies in J.D. Power’s annual study. (A white paper about the study, referenced at the end of this article, includes a more detailed description of how the analysis was conducted.) We went through the exercise twice—once for auto insurers, where J.D. Power rankings were available from 2010-2016, and once for home insurers, where rankings were available from 2009-2015. In both cases, our model portfolios tracked the stock performance of the carriers for the year-earlier period of their designation as a Leader or Laggard (for example, J.D. Power’s 2016 Leaders were used, retroactively, to build our 2015 stock portfolio). This approach was consistent with our thesis that the market would already be rewarding/penalizing the Leaders/Laggards in the full-year period preceding the release of J.D. Power’s consumer survey (given the customer experience the carriers were already delivering). It also helped ensure that the model portfolios’ performance was not at all influenced by the publication of the J.D. Power study itself. The results of our analysis were quite compelling. As Figure 1 shows, over the seven-year period studied, the portfolio of Auto Insurance Customer Experience Leaders far outperformed the industry, generating a total return that was 129 points higher than the Dow Jones Property & Casualty Market Index. Three carriers had the distinction of making it into the Leaders category for each of the seven years examined (in alphabetical order): Ameriprise, Erie Insurance and GEICO. (Editor’s Note: For insurers that are not publicly traded but are owned by a publicly traded holding company, such as GEICO and Berkshire, the performance of the holding company is used in the Watermark Consulting analysis.) The Customer Experience Laggard portfolio lived up to its name, posting a total return that was 75 points lower than that of the broader P/C market. As with the Leaders, there was some year-to-year consistency in the Laggards list, with three firms showing up in that category every year of the study: MAPFRE-Commerce Insurance, The Hanover and 21st Century (in alphabetical order). To underscore the disparity in performance between the Leader and Laggard portfolios, consider this: The Auto Insurance Customer Experience Leaders generated an average annual return that was nearly triple that of the Laggards. The Home Insurance Customer Experience Leader portfolio outperformed the industry, generating a total return that was 42 points higher than the Dow Jones Property & Casualty Market Index. See also: Keen Insights on Customer Experience   While several home insurance carriers made it into the Leader category multiple times, only one achieved that distinction for every year of the study: Erie Insurance. The industry’s Customer Experience Laggards again trailed behind, posting a total return that was 15 points lower than that of the broader P/C market. The Laggard category, too, was generally consistent year-to-year, though only one company placed in those ranks every year of the study, and that was Travelers. To again illustrate the wide gap in Leader/Laggard performance, consider this: The Home Insurance Customer Experience Leaders generated an average annual return that was double that of the Laggards. Interpreting the Results Let’s start with what the results don’t mean. A great customer experience does not guarantee carrier success. There are a whole host of factors that influence insurer performance, such as underwriting discipline and regulatory compliance. Customer experience is a necessary but not sufficient ingredient for carrier success. Despite that caveat, there’s no denying that this study’s results—reflecting over half a decade of carrier performance—are intriguing, to say the least. The findings imply that the much theorized connection between customer experience and financial performance isn’t a purely academic concept and can actually be observed within the insurance industry. The results point to the benefits enjoyed by carriers that invest in, and effectively execute on, a customer experience strategy: higher revenues (due to better retention, less price sensitivity, greater wallet share and positive word-of-mouth) and lower expenses (due to reduced acquisition costs, fewer complaints and the less intense service requirements of happy, loyal customers). Conversely, the study also provides a sober reminder of how customer dissatisfaction saps business value by depressing revenues and inflating expenses. See also: Best Way to Track Customer Experience   The bottom-line implication is that the marketplace believes carriers that deliver a great customer experience over the long term are simply more valuable than those that do not—and that’s a finding that should be of interest to public and private insurers alike. Takeaways for Insurance Carriers Perhaps the most important takeaway from this study is that insurance firms shouldn’t resign themselves to delivering just a mediocre customer experience (at best). The results suggest there is competitive advantage to be gained by differentiating along this axis, but it requires that carriers embrace some key realizations before setting a path forward:

• Retention is not a good proxy for loyalty.

Insurance providers often rely on retention to gauge the quality of their customer experience. While retention is a valuable metric, it can be a misleading indicator of customer perception (after all, a retained policyowner may not necessarily be a loyal one). As a result, many firms tend to overrate the quality of their customer experience.

• Insurance can be more than a “grudge” purchase.

Some question the viability of a customer-focused business strategy in insurance, given it’s an intangible product that people must buy, never knowing if they’ll get any benefit in return. Smart carriers overcome this perception by engaging customers with value-added services that transcend traditional insurance coverage.

• It’s essential to focus on more than just claims.

As the ultimate moment-of-truth in insurance, it’s critical that the customer claims experience be exceptional. However, the vast majority of insureds won’t experience a claim in any given year. For this reason, it’s essential that experience improvement programs go beyond claims—targeting other, more common customer touchpoints.

• The mundane things matter.

Insurance is a low-interaction business, which amplifies the impact of routine, recurring transactions on customer perceptions. Firms often treat these interactions (policy delivery, billing, renewal, etc.) as mundane administrative tasks—and it shows in the resulting experience. However, for many insureds, these mundane touchpoints are the entire experience, which is why these routine interactions deserve close attention from carriers. Insurance companies are struggling to set themselves apart in a marketplace that increasingly views their products as commodities. As the Insurance Leaders in this study demonstrate, the best way to break out of that “sea of sameness” is to deliver an end-to-end customer experience that turns everyday policyholders into true raving fans. Note: A white paper describing Watermark Consulting’s 2016 Customer Experience ROI Study (Insurance Industry Edition) is available for complimentary download at http://bit.ly/CX-ROI-INSURE. This article originally appeared on Carrier Management.

At SMA we have long been tracking the rise of smart things and their implications for the insurance industry. A variety of emerging technologies has been rapidly advancing to make everything imaginable smart. But participating in the ESRI User Conference in San Diego this year has driven home one key point: Geospatial solutions will have a critical role in making sense of all those smart things. The notion of a connected world is not an academic pursuit – possibilities to ponder about sometime in the future. It is a here-and-now issue affecting every industry, including insurance. See also: Insurance and the Internet of Things   The Internet of Things is already upon us. Sensors and embedded chips are present in buildings, infrastructure, agricultural settings, vehicles, devices in the home, medical facilities and government operations. Add to that billions of mobile phones and the capability to track location, movement and environmental conditions, and the result is many connections and massive amounts of data already measuring, monitoring and acting on the world around us. Predictions about the adoption of connected things vary widely, but, by any measure, the connection points and the data volumes will continue to increase exponentially. The problem, then, is not deploying smart things or collecting data from the smart things. The fundamental problem is the ability to combine and analyze data to gain some insights. In some cases, those insights might trigger decisions with global implications, solving some of humanities thorniest problems. In other cases, the insights might lead to a small action that improves the life of one individual. Enter geospatial solutions. Analytics and big data, in general, have essential roles to play in understanding the data generated in the connected world. But visualizing that data in a way that tells a story and reveals insights is the province of geospatial solutions, an area that has much to contribute to the connected world. Unfortunately, old impressions of geographic information systems (GIS) linger, especially in insurance. Most insurers have GIS solutions to do geospatial analysis, but they tend to be used by a small number of specialists for very specific applications. Today, the advances in 3D; animation; digital capture through drones, satellites, or LiDAR; and other technologies offer new opportunities. Tools for spatiotemporal analysis (understanding changes over time), crowdsourcing of real-time data and cloud-based collaboration platforms for maps and apps have elevated the discipline and provided government and industry with the potential to gain a deep understanding of the world to aid in addressing both new and old problems. See also: How Connected Will Connected World Be? Many insurers are considering the implications of the connected world and how it will affect their particular lines of business. Connected cars, smart homes, the quantified self, smart cities, autonomous commercial fleets and many other new areas create both threats and opportunities for insurers. Evaluating how geospatial capabilities can be harnessed to gain a better understanding of these emerging areas should be part of every insurer’s strategy and planning initiatives.

As new technologies like mobile are used and the need for agility and speed rises, so does the need for new testing techniques; otherwise, testing will hold implementations and organizations back. Just as today’s systems are modernizing, new testing methods and tools are rapidly advancing the quality and speed of development and implementation. To assess the current state of testing and reassess the need for insurance-specific testing, Majesco recently reviewed modern testing processes. What we found makes a case for modernizing enterprise-wide testing. Moving from static to dynamic Insurers need to have core systems that will be able to add capabilities, products, workflows and more through configuration. They will need an overall approach to system quality that will allow for continuous updates. Robustness and stability will need to be tested to bolster quality assurance (QA), and a whole new world of testing will arise to cover the various software areas that will be added to the enterprise. Not only will testing needs grow, but also a dynamic framework for understanding enterprise-wide testing will be mandatory. See also: Baseline Testing Provides a Win Minimizing risk Many organizations are worried about the risks involved in transformation and their inability to have clarity around operations, development, migration and the investments involved. Insurers are realizing that they need a well-designed QA process. Three key components are coming to light:

• Previously tried-and-true approaches are no longer best practices in testing. (For example, the waterfall approach to development and testing will no longer provide the results needed.)
• A single testing partner with a framework and methodology and domain expertise is vital.
• The end goal is to employ a single platform that works with a variety of approaches and tools in a way that enables agility and speed.

Reaping the benefits As digital enhancements grow and system touchpoints and channels are on the rise, test types are also becoming broader. Manual testing is still needed. Automated testing is more frequently employed. Performance testing and digital testing are more important than ever. To cover all types of testing, insurers need an automation framework that is structured, simplified and process-based. They need a system that “learns” and provides long-term efficiency by allowing for the repeatability of tests while increasing the speed with which tests can be executed. See also: Inventing Your Future: A 3 X 3 Approach A modern testing framework will give insurers prompt developer feedback and will support agile development. Testers will have the capability to build automation in parallel to application development. They will give users the ability to conduct continuous and recurring regression tests. Business analysts will be able to get more involved in testing. Scriptless automation techniques will provide business users with their own test automation capabilities. These are just a few of the ways that a modern testing platform will bring insurers into the future and give them a competitive edge. To dig more deeply into the benefits of expert testing in the transformation process and beyond, download Majesco’s recently released white paper, Putting Insurance Testing to the Test. In addition to Majesco’s testing overview, supplemented with industry perspectives from the research firm Novarica, readers will find a valuable example of an agile-friendly test automation approach as well as a helpful list of distinct service elements that should be taken into consideration when picking an IT testing partner. This article was written by Dan Mets.

I usually approach conferences with mixed emotions, whether attending, learning and networking or speaking. Ultimately, for me, conferences and events are about connecting people and ideas and moving the debate and understanding forward. To this end, I was delighted to join some great folks over at EXEC Insurtech in Cologne, which for me ticked all the boxes. It had a really interesting mix of folks attending, old and new, a serious number of VCs (AXA Strategic Ventures, Commerz Ventures and many more), There were angel investors and more and, importantly, a whole host of new start-ups, many very early-stage. There were some really great ideas from outside the U.K. market, so new to me personally. And it's always great to see SPIXII, RightIndem and other graduates from the InsurTech StartupBootcamp in London with Sabine VanderLinden. See also: InsurTech Boom Is Reshaping Market   In addition to a number of panels where I was able to share the latest views from the Capgemini 2016 World Insurance Report, I was asked to share some perspectives with the group on InsurTech. I wanted to share the same here.

1. We are in a bubble. By "we," I mean, those who are here at EXEC InsurTech and see the opportunity. Not everyone sees the world this way, yet! Many of you know I'm a firm believer that disruption is here and now, coming at us thick and fast.
2. Stand out. Whatever reports you read, be it the tech journals, insurance news or the traditional annual reports from existing carriers, they all talk to the disruption of the traditional insurance carrier (following the "unbundling" of the banks). There are now hundreds of start-ups in this space. It always amazes me to hear Sabine and theStartup Bootcamp team talk to how many start-ups they talk to prior to shortlisting to their final cohort. Make sure that when you are on stage and you have three minutes to pitch, you stand out. Don't be the me-too.
3. There have been no really big failures yet. There is excitement and buzz around what people are up to, where disruption is coming from and what part of the insurance value chain people are attacking (sales, underwriting, distribution, etc.). Given this, there has been record investment in the sector; the prize is huge, with a $5 trillion market opportunity. Matthew Wong and the folks over at CB Insights continue do an amazing  job at tracking deal flow, more than $1 billion so far in 2016. The example nearest to a failure that I called out was Zenefits, given its recent re-valuation. Another one was mentioned from the audience -- CSS in Switzerland, I believe, but please correct me if I have this wrong.
4. Partnering is key.  Given the history, tradition and especially the speed of the industry, my view is it's best to partner and work with the traditional players as opposed to going all out head-to-head today. This may, of course, change over time. There are some really great examples of partnership already.
5. Evolution or revolution? This is one of my favorite topics. Unlike banking, where I believe #FinTech has unbundled individual services ofmatthew  a bank, insurance start-ups have taken a different approach. Underwriting, for example, is not a category all unto itself nor one that I have seen folks go after in isolation. All need other parts of the insurance value chain to be successful. There are great examples of start-ups evolving each part of the value chain, across products, distribution, sales, etc. Matteo Carbone put together some good thinking a while back on this with his mental framework covering awareness, choice, purchase and use, as did Venture Scanner here in a series of visuals. For now, we are primarily digitizing and simplifying the existing approach and process.
6. Product mindset. We simply need to move away from this. It will take generations for a complete mindset change. It will happen, in my view, when start-ups move to an "all risks" or truly customer-centric approach (not just better service experience). My two golden rules here remain: relevance and convenience. At what point does insurance become frictionless?
7. Every carrier is partnering. Pick your partners carefully. I was talking to one of the start-ups that has now engaged in 30-plus pilots. While this is really encouraging and great for the start-up, every carrier is a) partnering, b) building a lab c) working with an accelerator. Make sure you don't become part of a badge-collecting journey. Are your and the insurance carrier's ambitions, culture and outcomes aligned? Make sure we are all walking into these partnerships with eyes wide open and with a clear plan of what happens if a partnership is successful.
8. AI/data/bots are big and cool. That is all! There are some great use cases and examples developing here. We heard from SPIXII and Insuragram, just two examples of how AI and bots are looking to solve some of the business and engagement challenges.
9. Don't be the fad. See #7 and #8. Over the last few years, I've seen the rise and rise of big data. Then came digital. Now it's blockchain and chat bots. My point here is that these are all great technologies. But don't be the technology looking for a business problem to solve -- sage old advice you will hear again and again.
10. Beware of the silos. Many start-ups are working with global carriers. Just because we work with them in one country doesn't mean they all talk, are connected seamlessly internally and exchange ideas and key learnings. The same is true for in-country and across lines of business. Many people operate in silo'ed P&L models where you may end up doing multiple different engagements with the same global carrier. Joining the dots may not always be right for you. Think speed! You're in a relay race. Moving parts of an organization to the start line is often easier than moving the whole team at once. As the saying goes,"think big, start small, act quickly."
11. Customers (end customers) need to be ready.  With all these cool new ideas and apps that can disrupt traditional insurance, our challenge is often not whether something can be done but whether customers will be ready. We know it can be done; everything is possible! But there are many reasons why customers take a while, often a long while. Telematics is 25-plus years old, but it's only now becoming more widely adopted. Even now, take-up is still relatively slow (except in Italy).
12. Talent. Above all, there is an arms race for talent out there. Bringing together InsurTech and traditional insurers is one of the best ways of ensuring (no pun intended!) that we continue to attract and leverage some of the greatest talent in the marketplace, promoting Insurance along the way as a great place to excel and challenge the status quo.

See also: InsurTech Forces Industry to Rethink So back to one of my initial comments -- what conferences do for me. At this one, particularly, I was delighted to meet with so many folks looking at the market from different angles. Conversations about Europe were especially interesting given the recent U.K. BREXIT decision. Finally, getting to exchange ideas with Matteo Carbone of Bain and Florian Graillot of AXA Strategic Ventures in person was the icing on the cake. Gentlemen, until next time. My thanks to Robbie Boushery, Moritz Delbrück and the team at Pirate Summit for bringing this all together. So what do you think? Good sage advice? Something missing? What would you add/remove from my list? Looking forward to continuing the debate!

The insurance sector, which is considered to be fairly traditional and resistant to change, is currently being overtaken by a macro trend of digital transformation. This is causing institutions with hundreds of years of tradition to rethink their insurance business models, by identifying modules within their own value chain that need to be transformed or reinvented with the help of technology and data usage. InsurTech represents a macro trend destined to take on an ever-growing relevance in a world that tends toward hyperconnectivity and the infiltration of technology into all aspects of society. The insurance business will become more InsurTech-oriented, and technology will have a decisive role in reaching strategic goals. This applies to insurance companies, reinsurers, intermediaries and newcomers. During 2015, InsurTech start-ups received around $2.5 billion in funding, according to LTP.

Investors liked B2C #insurtech I saw > potential on B2B2C to concretize innovation@Minh_Q_Tran which is your view? pic.twitter.com/g6F6VOMMQn

— Matteo Carbone (@MCins_) 25 March 2016

The number of innovative initiatives is growing exponentially, raising interest for all phases of the customer journey and all steps in the insurance value chain. This reveals a very crowded map of innovations that were introduced by the incumbents of the insurance sector or by start-ups. The innovations can be divided into seven macro areas: awareness, choice, acquisition, use, recommendation, Internet of Things (IoT) and peer-to-peer (P2P). One of the main challenges for analysts, incumbents, start-ups and investors is identifying the degree of relevance that these innovations represent for the insurance sector. See also: InsurTech Start-Ups: Friends or Foes? After many discussions with venture capitalists and insurance thought leaders, I’ve come up with my own answer for the following question: What is the potential of each InsurTech initiative? My approach is based on four axes related to the fundamentals of the insurance business:

• Profitability: Impact that an innovation may have on the level of profitability of the insurance portfolio, acting on the loss-ratio level or on the cost level without an increase in volume.
• Proximity: Contribution for creating improved relationship that is based on numerous touchpoints during the customer journey. Bain’s international research reveals that the customer satisfaction (measured with the Net Promoter Score approach) of those clients that have interacted directly with the insurance company is markedly superior to those who have not. Obviously, there is a predictable relationship between satisfied clients and their economic effects.
• Persistence: The reach of the new initiative in terms of renewal rate increase, and thus of stabilization of the insurance portfolio.
• Productivity: Evaluation of the contribution that a certain InsurTech approach can have at the top-line insurance level in terms of client acquisition, cross-selling or additional fee collection for services.

These considerations refer to a specific innovation initiative and are not absolute. On the contrary, they should be customized to each specific market, line of business and client segment. In a similar manner, an insurance company has to make these considerations by taking into account both the contribution brought toward the achievement of strategic priorities and the coherence with its distribution approach. I am convinced that evaluating InsurTech opportunities based on this pragmatic approach clarifies the rationale behind each innovation initiative. It facilitates the prioritization of initiatives and ultimately helps focus investors’ and innovators’ efforts. If we consider some connected-insurance use cases, it is easy to understand the reason why the World Economic Forum identified connected insurance as one of the main insurance innovation trends:

• Profitability: From this perspective, the experience of the Italian insurance market in motor telematics (which is the most advanced market at an international level, with a 16% penetration for private use vehicles) shows how this approach is able to generate actual value for the insurance bottom line by acting on risk selection and the claims management process.
• Proximity: Nowadays, within the connected car line of business, there are dozens of different services based on data collected from black boxes—services that the insurance company offers to the final client. By focusing instead on health insurance, the Chinese insurer Ping An has built an initiative based on connected health that recently raised a round A financing of $500 million, with an valuation of $3 billion.
• Persistence: The experience of Discovery Holding in the field of protection has shown relevance when it comes to reducing the lapse rate by using the Vitality approach—which works by identifying and rewarding healthy behaviors.
• Productivity: The data recorded by sensors represents a great opportunity for getting to know customers and to send personalized offers at the best moment possible. This potential, which is yet to be explored, is precisely the driver that helped create the start-up Neosurance, recently awarded the IoT Newcomer award at the Insurance IoT Europe Summit.

These insurance approaches suggest the use of sensors for data collection for different business lines. This data refers to the status of an insured risk, and to the telematics for remote transmission and informatics management, alongside the insurance value chain of the collected data. These approaches represent a great opportunity for connecting the insurance sector with its own clients and their risks. See also: Secrets InsurTechs Need to Learn Italy is today one of the most advanced ecosystems of connected insurance, encompassing 4,9 million auto insurance contracts, which include a box provided by the company, and almost 50,000 home insurance contracts, which are characterized by the use of sensors communicating with the company. In this context, the Connected Insurance Observatory was born: a think tank dedicated to spreading the culture of insurance innovation. I put together the Observatory at the beginning of 2016 with the support of the Italian National Association of Insurance Companies (ANIA). The Observatory has made it possible to unite 30 primary Italian and international insurance groups and some 15 other interested players to bring a contribution to the InsurTech story in the making. https://youtu.be/yYIfhe6f0pQ?t=42s

Amid the merry-go-round of new objectives, targets and budget allocation that keep many a leader of an insight team busy, there is a question of “Who?” Who will do the work? That is probably accompanied by “how many people will there be in my team?” and “do they have the skills and motivation they need?” At first, this can all feel rather daunting. But it will be helped by, first, being clear on your goals. If you know what matters most and why, you're in a better place to make those ever tricky people decisions. Staffing your team has more potential options than in years past, with more data, analytics and research agencies, consultancies and contractors. Determining which route to take requires some thought. In my conversations with leaders, it sounded like different businesses favored different resourcing models, but it was unclear which was most popular. For that reason, we ran a survey among our readers about customer insight team resourcing models. Thanks to all of you who took part. The time has come to share those results. First, we asked about how customer insight leaders currently resourced their four technical teams that make up holistic customer insight:

• Customer Data: For this team, as you can see, most leaders (67%) replied that all members of the team were employed by their company. The only alternative resourcing approach captured was a mixture of employed and contractors — but still all part of an in-house team. Perhaps it's the greater ease of recruiting these skills, or the sensitivity with regard to customer data, but this team doesn't appear to be a focus for outsourcing at the moment.

• Customer Analytics: For this team, there was a similar picture, with an even bigger majority of leaders (80%) stating that all the members of the team were employed by their company. Once again, the only other alternative captured was a mixture of employed and contractors as part of an in-house team. These results were perhaps more surprising, given the much-touted difficulty recruiting analysts or data scientists. Perhaps many businesses are still recruiting rounded analysts rather than the more limited pool of data science graduates. The result certainly flies in the face of advertising by many outsourcing analytics providers.

• Customer Research: Here, we began to see a slightly different picture. Only 50% of leaders replied with the most popular resourcing model thus far, that all the members of the team were employed by their company. The other half were split between outsourcing their research provision entirely and a mixture of both approaches. Sadly, this doesn't surprise me. I've found many a CMO or CEO who assumes that research is an ideal candidate for outsourcing and just asks the agency to “do more.” Sometimes, this is down to the internal team not demonstrating clearly enough the value they provide, so they are simply being perceived as “research buyers.”

• Database Marketing: Last, but definitely not least, is this commercially focused insight team. This category showed the most variation in resourcing models. More leaders (40%) still chose the most popular option; all the members of the team were employed by their company. But all the options we have seen so far were also used — contractors, outsourcing and a mixture of all of them. Given the more visible dependency that most businesses have on this team to hit income targets, I was slightly surprised by this.

As always in business, past approaches are no guarantee of business strategy, funding priorities or resourcing model preferences going forward. So we added a couple of questions to capture personal preferences. Experience has taught me that the preferences of two key parties tend to influence the way customer insight teams are resourced. First is the CEO and any recruitment policies he mandates; second is the customer insight leader who is leading the recruitment. See Also: Leveraging the Power of Data Insights So, how did you vote for those two personal preferences in resourcing models, and does that give us any clues as to how customer insight teams may be resourced now?

• CEO preference: This reflects that CEOs value customer insight and view it as a potential competitive advantage, so the majority prefer all the members of the team to be employed by their company. There were also votes for use of contractors within in-house teams, a mixture of both and “no preference” (it depends on the team). This appears to be a continued opportunity for customer insight leaders to build on in 2016, to demonstrate to their CEOs that they offer that competitive advantage and are a key internal skills within their business.

• Your preference: So, we finally come to the resourcing model that customer insight leaders themselves favor. What has given them the best results, that they would prefer to have at their disposal to achieve 2016 targets? Well, based on votes, it would seem the answer is definitely in-house teams. 60% favor all the members of the team being employed by their company, with the other 40% voting for a mixture of employed and contractors making up this internal team. For what it's worth, that was my own experience, too. Growing your own talent internally worked best.

I hope you found the results useful. Do they accord with your experience? One final thought, if you are seeking to build a strategic insight capability within your business, one that will empower your company for years to come, are you thinking long-term? Rather than be at the mercy of whether the jobs market has the candidates you require or graduates have the skills and aptitudes you're seeking, why not shape the latter? I know a couple of businesses that have seen real value through building strategic partnerships with local universities. See Also: A Wedding's Lessons on Customer Insight If you are fortunate enough to have a local university with a good reputation for numerate graduates (from business school or maths/stats faculties), why not work with them? Are there opportunities for internships to try out potential future employees? Would it benefit the university for you to go in and speak to students, even teaching them some of the skills they will need within business? How much better would it be for you to know  that students are being trained in the skills you require? A great example of building this kind of partnership was the Data Talent Scotland event. I'm proud to have delivered a workshop at this gathering of data science students, academics, industry experts and businesses, helping to forge the kind of partnerships customer insight leaders will need. Please let me know if you have built a sustainable pipeline of talent to resource your insight team for years to come. What's working for you?

In a previous article, we discussed how there has been a rapidly accelerated emphasis on insurance technology, data and distribution. But are we as an industry spinning our wheels? The answer is a big “yes.” Why? Because we haven’t asked the right questions and aren't trying to solve the right problem. Here’s how distribution breaks down: A Painful Process Our customers have many issues around running and growing their businesses. Insurance empowers customer to do just that — hire employees, comply with regulations, etc. — but the way we go about it is asking endless questions (multiple times over). We focus on what we think doesn’t work instead of what DOES work about their businesses. We are the Negative Nellies. We turn little things into big things, over-analyze them and then use them as reasons to charge higher rates. An evolved distribution would:

• On the back end:
  • Draw on information in data bases and simply ask the customer to validate that nothing has changed.
  • Handle everything electronically ONCE. (And, no, email doesn't qualify!)
  • Use publicly available information to fill in the blanks.
  • Leverage class and big data to price and only use underwriting to manage exceptions.
• On the customer-facing side:
  • Stop sending apps we have to print out, fill in and fax back or, even worse, writable PDFs that don’t save (we have to fill it out over and over until we get it completed on one run through) and then come back and tell us we need to fill out yet another app for another market. It’s like Groundhog's Day, and we don’t have time for it.
  • If we DO have to fill something out, let us know what information we will need ahead of time so we can have it ready. Right now, we have to stop and start as we have to go look for stuff — and, frankly, we just don’t have time for it.
  • Let us know what the cost is ahead of time. We know you don’t want us to shop our policies — we don’t want to either — so do us a favor and don’t make us. We don’t like being painted into a corner, and we'll continue to look for a partner who respects that.

See also: 3 Skills Needed for Customer Insight Pain About the Purchase Have you ever bought a house and thought about the real estate agent collecting a fat check? Have you gotten a knot in your stomach because you know you paid to fund that? What about the finance guy at a car dealership? You sign on the dotted line because you need to, but you know he's pulling down a check for that signature, and it bothers you. Insurance buyers feel the same way. Even though we will tell you we are their “trusted advisers,” the reality is that customers more often than not (and no matter how much they like their agent) can’t answer the question, “What do I pay my agent for?” That’s a problem. Distribution should look at ways to be more transparent, to help customers clearly understand what they are paying for and what they can expect to receive and when. More importantly, customers should feel like we appreciate their purchase. Often, they ask us to bind, and the next thing they see is a bill (even before a binder). How about a “Welcome to our company,” “Thank you for your trust” or, even more importantly, “Tell us about your experience.” Allow customers to benchmark costs and give them a level of comfort that what they are paying is in line with others — and, if not, why. It’s a simple question that deserves a simple answer. For us to have the vast data stores that we have and not be able to answer a simple benchmarking question is nothing short of unforgivable. Just a Promise to Pay? Customers want more than just a promise to pay, and distribution could provide meaningful value to the customer beyond the policy placement. Does the customer have conditions that are raising their price or limiting their ability to get coverage? Educate them, provide tools, help them become a better business and, by extension, a better risk. In that way, we drive value to them instead of wasting valuable time. Look for ways your products could help them sell more and gain a competitive advantage. Take risk out of growth and provide overall out-of-the-box solutions. Provide them with tangibles, even if it is as simple as a portal where they can manage what they have, manage their exposures and communicate with their account team. See also: How to Redesign Customer Experience Conclusion It’s clear that customer experience is the key to success. By giving your customers some control over the process, you can remove the typical painful buying experience and make your customers feel good about their purchase.

What do most businesses do when competitors steal their customers? Copy them. That’s the natural, logical tendency. If competitors have a new killer feature, we copy it. If they have a new killer marketing message, we copy it. If they have new killer sales system, we copy it. Sooner or later, we all start looking the same. (And, yes, consumers can hardly be blamed when they think this insurance is a commodity. Looks like one…acts like one…well, quack!) And that – the copycat strategy – is among the most dangerous, destructive things we can do. In fact, the massive amount of copying witnessed in the retail insurance industry just might be the early ringing of the death knell. “But if we don’t copy what is successful for others, then what should we do?” Of course, agents and brokers read the reports on market share erosion. They see the billion-dollar barrage of advertising from alternative distribution systems. They read the forecasts and predictions about innovators, disruptors and new, well-financed outsiders poised for the kill. They know consumer behavior is changing rapidly and question whether they can keep up. There is -- naturally -- a deep, underlying anxiety about the future of this system. These current and impending attacks on what has so long been our safe harbor frighten agents and brokers. They need a strategy. And, far, far too many have simply chosen the wrong strategy. They see, hear and read (daily!) GEICO’s message about “price, price, price,” and they see that train only picking up speed. Naturally, what do they do? Copy it. They advertise on price. They give “quotes” and hope the price is attractive enough to win the business. If it’s working for the opposition, it should work for us, right? Wrong. See also: Integrating Strategy, Risk and Performance   Three reasons never, ever to copy Business coaches tell us that “success leaves footprints,” so, what’s wrong with following those footprints and copying a successful strategy? At least three things: 1. We copy what we see. We don’t copy the important behind-the-scenes business processes and systems we don’t see. Staring at “footprints,” we very rarely see the whole story. We see the surface. Beneath the surface, there is an entire alignment of complex business processes and systems that make that surface shine the way it does. You think you can see Starbucks' strategy for being the most successful coffee house on the planet, right? It’s right there in the open. But, behind charging more and delivering a reliable, delightful customer experience are billions of dollars invested in sourcing, roasting, shipping, presenting, training and other systems that we never see. Following part of a recipe is a sure way to end up with a plateful of garbage. 2. Generally, following is in itself a bad strategy. The best you’ll do is a weak second place. Unless your strategy offers something different and something that matters, those you are following have the advantage of leadership. They own that niche in the mind of the customer. Of course, if you have massive resources, you may be able to leapfrog your leading competitor. With GEICO alone investing a cool billion a year on advertising, that will not and cannot happen. Those resources simply do not exist in the agent-broker channel. 3. Copying strategy means that you’re skipping the hard work of strategy: clear-eyed analysis of what’s happening in the real world and how you can unleash your best assets to win there. As every serious student of strategy knows, good strategy is based on an unflinching analysis of internal and external forces, and disciplined choices about where to play and where not to play. And here, we get to the serious flaw in the most common copycat strategy performed by agencies and brokerages. We see the consumer being “brainwashed” with the incessant pounding of “price, price, price,” and we witness the loss of market share in our channel, and what do we do? Copy that strategy...and try to sell on price. And, herein, lies the most dangerous part of trying to copy your way to success. A good strategy for one company or one distribution system is almost always a bad strategy for everyone else. How can we win against our well funded competitors? Small armies beat big armies. In fact, very, very small armies beat very, very big armies. You would expect a military that is 10 times the size of its adversary to demolish a small opponent. But no, military historian Ivan Arreguin-Toft has shown us that the 10X behemoth loses 30% of the time. That’s right. 30% of the time, an army that is 10% the size of the opponent wins. How does the smaller army win? By fighting a “different war.” (In fact, since 1950, smaller armies have won 55% of the time.) The same is true in business. We can only win by fighting a different war. We cannot copy strategy. What's wrong with selling on price? Isn't that what the consumer wants? Here are four reasons why independent agents and brokers should never sell insurance on price. 1. Our channel is more expensive. So selling on price is just plain dumb. Sure, you'll find exceptions. Even the slowest lion picks off the slowest gazelle. But in the long run, put your resources where they have the best chance of winning. The price-shopping insurance customer -- and, yes, there are millions of them out there -- will seek and find a home. And billions in advertising dollars are helping them navigate their way. I recently analyzed four years of AM Best industry data and, not to my surprise, discovered that the independent channel was an average 2.3% more expensive to operate. And, with the direct channel's massive commitment to advertising, a lot of the expense gets consumed there, and proportionately less in other expenses. Moral of the story: when you're more expensive, don't compete on price. 2. Selling on value wins more than selling on price. Researchers from Deloitte, led by Michael E. Raynor and Mumtaz Ahmed, analyzed data on more than 25,000 companies covering 45 years of activity. Their five-year study began with a statistical analysis to identify which companies have truly exceptional performance, 344 in all. They discovered that the most successful companies -- based on a thorough examination of return-on-asset performance -- followed three strategic rules:

• Better before cheaper. They rarely compete on price.
• Revenue before cost. They drive profits through price and volume, not thrift.
• There are no other rules. Everything else is up for grabs, and they are willing to change anything to remain true to the first two rules.

Of course, selling on value can't just be another empty advertising jingle. Agents and brokers have to deliver value. They have to add value as the product passes through their hands to the consumer. That may be a new demand for many agents and brokers today. Perhaps in generations past, selling the product was sufficient. But, as today's consumer is offered a growing array of choices, this is no longer an option. Especially as the consumer progressively sees more and more of insurance products as a replaceable commodity, value must be added at the retail level. The inherent and unique strengths of the independent channel -- the benefits of relationship -- must be leveraged to the consumer's advantage. Modern communication technology makes this much, much easier. And i's costs are fractional compared with additional payroll. 3. Selling on price is the ultimate race to the bottom. First of all, selling value costs more. You must do something extra, something more. And that usually costs money. When you're selling on price, you're killing your profits. From what bucket do you draw to create that extra value? If, let's say, you have a 20% profit margin, and you backed everyone's premium down by a mere 10 points, that's half your profit. Price selling results in a self-inflicted spiral down the drain. First, you sell for less. In response, you invest less in your support staff and systems. Then, your customers feel less satisfied… on and on it goes. Price selling may result in short-term wins. You'll sell a few policies that you wouldn't have otherwise. It’s much, much easier than investing in the blood, sweat and tears work of creating new value. Training staff. Monitoring behavior. Managing new systems. And so forth. Moral of this story: The industry has matured far beyond the "lifestyle" stage where the retail sector merely acted as "sales reps" for manufacturers. They absolutely must add value. That is what grown-up businesses do. 4. Surprise…consumers don't care about price nearly as much as you think they do. Price never completely goes away as part of the overall value proposition. But according to  astute research by Bain & Company, consumers are largely compelled to make their insurance buying because of one of these two values: price or peace of mind.

• The price-driven customer is perfectly suited to the direct channel. The peace-of-mind-driven customer is perfectly suited to the agency/broker channel. As industry-wide analysis will show you, the price-driven customer is expensive to get and easy to lose.
• The efficiencies of the direct channel are well suited and well designed to generate value from that demographic. The opportunities for depth of relationship and value-added communications make the peace-of-mind customer perfectly suited for the agency broker channel.

See also: Capturing Hearts and Minds   But doesn't price still matter? Yes, of course, but perhaps not nearly as much as you may think it does. My friend Brady Polansky from EzyLinx, shared what many may consider to be shocking statistics based on a massive study of consumer behavior. 57% of consumers who call independent agencies do not take the lowest quote provided. Rather, they choose insurance that costs between 19% and 53% more than the lowest quote provided. (Imagine what that could do to your top-line revenue!) Moral of this story: It's a naive assumption to think that all consumers are the same. They're not. Pursue the ones who best fit this channel: the people who actually care what insurance does. Remember when we took pride in saying that "insurance is a relationship business?" The top 5% or 10% of your customers probably feel that relationship. But recent research from Deloitte makes one thing very clear: The majority of an agent's customers don't feel that relationship. Agencies have simply outgrown the old-school methodologies of getting and keeping relationships. It's too expensive. Besides, that's not how customers relate to business anymore. Consumers expect a well-crafted digital communication strategy with their vendors. And agents and brokers can use today's digital channels to deliver value. Using modern technology, they can nurture their customers. They can help protect them. They can make them smarter insurance consumers. They can help prepare them for disasters. They can help prevent accidents, injuries and casualties. They can offer useful products. And they can follow each customer, one-at-a-time, and guide their customer journey, from the "I want a quote" to "I love my broker." Price marketing is fine…for the direct channel. Don't copy them. A winning strategy for their channel is a losing strategy for ours. But, if relationship and value are the pillars of our promise, deliver on it. Today's tools let you deliver on that old school promise…with new school technology. The Ultimate Solution for Maximum Growth  Is this an impossible situation for the leader of a modern insurance agency or brokerage? If we don’t have "price" in our quiver, just how do we make a difference in the lives of our customers? See also: Checklist for Improving Consumer Experience   If, in fact, they value relationship – that sense that they have an advisor and advocate in their corner – how do we deliver that? The days of glad-handing our clients around town are over.

• The old methods – one-on-one marketing and nurturing – are over. Those methods are dreadfully expensive.
• Most agents and brokers of today have a book of business that’s much larger than the average firm of a generation ago. It’s folly to think we have a traditional relationship with them. (How many times have you passed a customer in the vegetable aisle and they didn’t know you…and you didn’t know them.)
• Besides, the last thing today’s consumer wants is a random telephone interruption from their insurance agent. (They want you there…when they want you there. Not when they’re at work. Not when they’re having dinner.)
• The answer is simple. Our competing channels – the direct channel and the emerging digital channel – uses technology against us. But, today, agents and brokers can fight back. Using their own technology. Technology that delivers meaningful communications. Technology that treats everyone like an individual. Technology that strengthens your brand. Technology that deepens relationships. Technology that connects the data in your agency management system to a marketing system that fulfills the inherent promise in the agent-broker channel: that we’ll be there…that we’ll protect…that we care.To learn about how marketing automation can transform the way you communicate to your clients – and make your clients love your agency – download a copy of Buyer’s Guide: Marketing Automation For Independent Agents & Brokers. Readers may get a free copy here.